why Treasury department buys bonds ?

Question

how this affects money supply ?

Answer 1

Taranto is correct. It is the FED that BUYS U.S. Treasuries. The Repo market is the mechanism the Fed uses to add/remove liquidity from the money supply.

When the Fed wants to add liquidity, it buys bonds from the Treasury. When it wants to remove liquidity, it sells bonds to the Treasury.

What most people don't realize is the raising/lowering interest rates is the "minor" method the Fed uses to control inflation. The "major" method to control inflation is the fed adding/removing liquidity from the excess banking reserves through their Open Market Operations, ie, the Repo Market.

For example, the Fed raised rates to 5.25% to "fight" inflation, but yet they were adding liquidity to the money supply which is inflationary. Go figure.

Answer 2

When the Treasury department buys bonds, there is less money out on the open market. Therefore there is a higher demand for money, which makes the interest rates go up.

Answer 3

The Treasury department bonds are good and the rates are different depending on the amount of time to maturity. The Negative aspect is they are set for a pre determined return. In other words if you seek an investment that will return a greater amount than the fixed amount from the bonds, then there are many more opportunities. I can help you or you can consult a professional financial advisor in your area. If you want me to help you write to me at [e-mail]

Answer 4

The treasury department SELLS bonds to pay for a deficit in cash on the part of the government. Investors buy them.

The Federal Reserve will buy and sell securities in the Repo market to control short term interest rates.

Answer 5

If I remember correctly from my last economics class, the Treasury will buy bonds from the market, thus injecting more money into the circular flow which stimulates economic activity and expands the money supply.

Answer 6

i'm noticeably certain each and every time the authorities needs to improve capital, they could promote bonds. in the journey that they choose more advantageous, they are going to promote more advantageous. The Fed as a rule acts in simple terms because the governments economic corporation. The Fed would not could do with what percentage bonds the Treasury branch decides to promote, they in simple terms facilitate the transactions.

Answer 7

Interest. u can make a lot of money off the interest of Bonds.

Answer 8

to help support the price