Le Baron
Unbiased advice at reasonable rates
You are paying interest directly on the excess reserves to maintain the interest rate target, rather than the same money being converted into interest-bearing bond agreements. Which means no bonds need to get sold. The main reason they are sold is to meet that short-term rate and as said the central bank can also just adjust its rate to make that problem disappear and leave reserves in the system, with no disasters. And maybe even just stop selling bonds (or so many of them).Treat me gently.........
So for a layman, I have sjb bonds to sell but no-one wants to buy them - so what exactly am I doing ( paying the interest quote above) ?
.sjb
However, people like bonds from sovereign currency issuers and want to buy them. There is no default. The UK isn't Greece or any EU country. Bonds are easy income for the buyers, whereas the reversal is not.
Takeaway: bonds are not funding for government, they are income for bondholders.
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