1. Why would an investor in India be willing to buy a US bond that pays 0.25% coupon when he can buy an Indian bond that pays 8% coupon? Do note that for an Indian investor Indian bonds are risk-free. The Indian investor does not have any payable or debt in USD.
2. Recently the stock market reacted positively to Janet Yellen’s comment. She had stated that due to the underlying economic weakness abroad and susceptibility of the US economy to such weakness the fed was not going to increase the interest rate as rapidly as widely expected by the market. Why did the market react positively even though Yellen’s comment basically said that the global economy was weak?
**Answers should be short and thorough**