Stock Market Rebound

The Impact of International Crisis and T-Bill-Eurodollar Spread

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Question

The stock market tends to reach a ________ shortly after times of international crisis or a ________ of the T-Bill-Eurodollar spread.

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A. B. C. D.

D

An alternative measure of investor attitude or confidence on a global basis is the spread between T-bill yields and Eurodollar rates. It is reasoned that, at times of international crisis, this spread widens as money flows to safe-haven U.S. T-bills, which cause a decline in this ratio. The stock market tends to reach a trough shortly thereafter.