Required: a. Suppose Baa-rated bonds currently yield 7.0 %, while Aa-rated bonds yield 5.0%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.2%. What would happen to the confidence index? (Round your answers to 4 decimal places.) Confidence index increases from 0.7143 to 0.7560

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.