Question

As the yields on Greece government debt continue to increase due to increased risk of potential...

As the yields on Greece government debt continue to increase due to increased risk of potential default on Greece debt, one would expect German government debt yields to ________. As the yields on US government debt rise due to higher expected inflation within US, yields on British debt would______.

a. increase as well; decrease

b. decrease; increase

c. stay the same; decrease

d. increase as well; stay the same

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Answer #1

Yield in German government debt yields to increase because German and Greece economy are interlinked. If risk in Greece increases loans given to Greece by Germany might default and Germany may have bad loans in their account making their economy risky.

British Debt yield will stay the same because domestic inflation is internal to a country and not interlinked . UK infation might stay at same level hence their yield rates might not have any impact.

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