CACS Paper 2 Practice Questions - Client Advisor Competency Standards (CACS) Paper 2 - Industry And Product Knowledge Exam

A large unfunded fiscal expansion that markets price as higher future issuance and inflation risk is most likely to:

Guarantee a parallel downward shift in all sovereign yields Steepen or lift the nominal yield curve as term premia and inflation compensation rise Have no effect on bond markets if GDP is unchanged in the same quarter Compress all corporate credit spreads to gilt-equivalent levels permanently

Correct Answer:

Steepen or lift the nominal yield curve as term premia and inflation compensation rise

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