The answer to this question states, “…The manager expects that in the first quarter of 2000, there will be a surge of single A rated issues that will come to market, resulting in a widening of spreads and thereby providing opportunity to purchase single A rated issues relatively cheaply vs. BBB issues”
I thought that when there was an increase in supply spreads narrowed and therefore price increased, which is what the answer to Q9 in the same EOC states, as follows, “The reason suggested as to why heavy supply of new investment grade credit issues will help spreads contract and enhance returns…”
What am I missing here? I am really struggling with these EOCs in chapter 21 as they all say, “based on a reading from XYZ what does this mean,” I hope these sorts of questions are not on the exam! I did better on the harder chapter 20 EOCs that dealt with immunizaiton.
Thank you in advance!