From February 2022, until today, the world has plunged into an economic recession due to the war in Ukraine. How has this affected Europe's inflation, interest rates, stock markets, and GDP?
What is the expected outcome before the end of the year and in the first quarter of 2024?
Question:
What do you expect to happen to the yields on European Sovereign Debt? Why? Write down an equation representing the liquidity premium theory of the term- structure of interest rates. Explain the intuition behind your model. Given that bond, traders expect inflation will change even further in 2022-23, draw and explain the shape of today’s yield curve (for 3mth - 2 year notes)
