Reading 22 EOC 9

B

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In the question they say “Increases in investment-grade credit securities new issuance have been observed with contracting yield spreads and strong relative bond returns”
Since there is more supply, I’d expect the price to go down and interest spread to increase ?
How come this is not the case ?
 
Thank you Would You look …
Now what about the EOC 15 ?
I’m loss !
 
Validates the market and perceived risk is lower. a decrease in supply may result in issues unable to issue funds and create the perception of defaults in the future, hence spreads widening. This is how i inferred it,
 
But they say that supply will increase in 2000 … so if supply increases, spreads should narrow !?!?!
Very confusing ..
 
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