The following graph shows the S&P500 airlines industry index (LHS axis) versus the US 10-year government bond yield for the period from January 2021 to July 2021.

a) Use your own analysis to explain why the S&P500 Airline Industry Index and the U.S. 10-year government bond yield are moving in tandem since January 2021.

b) If a hedge fund rebalanced its asset allocation and started buying Airlines stocks and short-selling the US 10-year government bond at the beginning of 2021, discuss what kind of risks it had been accumulating, and what problems it had been facing since June.

The following graph shows the S\&P500 airlines industry index (LHS axis) versus the US 10-year government bond yield for the period from January 2021 to July 2021. a) Use your own analysis to explain why the S\&P500 Airline Industry Index and the U.S. 10-year government bond yield are moving in tandem since January 2021. [10 marks] b) If a hedge fund rebalanced its asset allocation and started buying Airlines stocks and short-selling the US 10-year government bond at the beginning of 2021, discuss what kind of risks it had been accumulating, and what problems it had been facing since June. [18 marks] [Total: 28 marks]