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Why are bond investors buying the long-end more

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Reference no: EM132688423

The Philippines' slower than expected Gross Domestic Product (GDP) growth has resulted in a flattening of the yield curve. Investors are buying long-term bonds, which decreased its yield; thus, increasing bond prices. Short-term bonds, on the other hand, has remained the same.

Problem a. Why are bond investors buying the long-end more? Use the pure expectations theory in explaining your answer.

Problem b. Although not all the time, why is flattening of the yield curve signifies a recession?

Reference no: EM132688423

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