Hi,
Not sure if you're still looking for an answer, but here's my take on it.
You are correct about curves, but here I think we interpret the increase in demand as an upward shift of the demand curve, I.e. higher quantity demanded at every level of price. This reflects an exogenous change in demand - perhaps risk has changed for other investments making bonds more desirable. The result is higher equilibrium price and hence lower yields. Same for reduction in demand, but in reverse.
Good luck for next week.
Last edited by a moderator: Sep 23, 2015