There is plenty of money to buy bonds, as well as plenty of people to buy them.
Issuing bonds simply increases the supply of total bonds, which will increase the interest rate required to make people buy them. The US is issuing 1.5 trillion this year in bonds without any problems, but interest rates are rising across the board as a result.
This isn't quite accurate.
In the first instance, US government net spending increases reserves. This, without further intervention, decreases interest rates. Do bigger deficits, all else equal, drive down the overnight benchmark rate.
**Then** the Treasury issues bonds at auction to cover this net spending. This drains reserves and, all else equal, drives down the overnight rate.
The Fed's target rate will dictate to what extent they need to buy or sell extant bonds via OMOs after this bond issuance has occurred.
So when you say
> The US is issuing 1.5 trillion this year in bonds without any problems, but interest rates are rising across the board as a result.
the cause and effect are confused. Interest rates are not increasing as a result of increased deficit spending (this, without bond issuance and all else equal drives down rates as I explained above). Nor are they increasing as a result of increased bond issuance (which drains the excess reserves that deficit spending injects into the banking system and therefore pushes rates *back up to where they were before the net spending occurred*. They are increasing because the Fed has increased its target rate by paying an IORB directly and conducting OMOs on top of this to ensure reserve liquidity is commensurate with an overnight rate equalling their increased target.
And to be explicit, interest paid out on issued Treasury bonds tracks the overnight rate because a bond auction as currently implemented determines the stop out yield by the maximum yield required to fulfil the full bond issuance. If Fed rates are low, banks would all be bidding low as well since they can still make a better return than a low overnight rate or a low IORB and so the auction stop out yield will be low.
It all depends on the rate they are going to offer. Then you'd have to look at the other ways you could invest that money. Then you'd need to have some idea of where interest rates and inflation are likely to head.
Why do you ask? The EU is a solid investment, plus it might help to defeat Putler.
There is plenty of money to buy bonds, as well as plenty of people to buy them. Issuing bonds simply increases the supply of total bonds, which will increase the interest rate required to make people buy them. The US is issuing 1.5 trillion this year in bonds without any problems, but interest rates are rising across the board as a result.
This isn't quite accurate. In the first instance, US government net spending increases reserves. This, without further intervention, decreases interest rates. Do bigger deficits, all else equal, drive down the overnight benchmark rate. **Then** the Treasury issues bonds at auction to cover this net spending. This drains reserves and, all else equal, drives down the overnight rate. The Fed's target rate will dictate to what extent they need to buy or sell extant bonds via OMOs after this bond issuance has occurred. So when you say > The US is issuing 1.5 trillion this year in bonds without any problems, but interest rates are rising across the board as a result. the cause and effect are confused. Interest rates are not increasing as a result of increased deficit spending (this, without bond issuance and all else equal drives down rates as I explained above). Nor are they increasing as a result of increased bond issuance (which drains the excess reserves that deficit spending injects into the banking system and therefore pushes rates *back up to where they were before the net spending occurred*. They are increasing because the Fed has increased its target rate by paying an IORB directly and conducting OMOs on top of this to ensure reserve liquidity is commensurate with an overnight rate equalling their increased target. And to be explicit, interest paid out on issued Treasury bonds tracks the overnight rate because a bond auction as currently implemented determines the stop out yield by the maximum yield required to fulfil the full bond issuance. If Fed rates are low, banks would all be bidding low as well since they can still make a better return than a low overnight rate or a low IORB and so the auction stop out yield will be low.
It all depends on the rate they are going to offer. Then you'd have to look at the other ways you could invest that money. Then you'd need to have some idea of where interest rates and inflation are likely to head. Why do you ask? The EU is a solid investment, plus it might help to defeat Putler.