my question is that on the treasury bond point you said that it is part of fiscal policy, but open market operations that is buying and selling of treasury bills is done of the Central bank na on behalf of the central government so the treasury rate should be impacted because of change in fed rate
@visiontobemillionaire the Treasury Department publicly auctions off new issue T-Bills through TreasuryDirect weekly in short maturity lengths of four-week, eight-week, 13-week, 17-week and 26-week; 52-week bills go to auction every four week. When you buy, your money will go the Federal Government and the President will spend that money on people's welfare or even on military and wars. However, you will buy only if the interest rate is attractive for you. Thus it is the market demand for treasury bills and supply of treasury bills that determines T-Bill interest rates. The supply of T-Bills is determined by the US President and FED has no role in that decision. That is not the case with FFR decision by FED. It is their FOMC that determines Federal Funds rates and discount rates. The market has to follow these rates. To answer your question, if FED feels that market determined treasury rates are too high because of low market demand, FED under its open market operations, will buy treasury bonds to reduce the treasury interest rates and vice versa. Hence trasury rates are market determined and completely independent of FED decisions. Through its open market opearations, FED can change the interest rates by increasing or decreasing market demand for treasury bonds, but FED does not know how much interest rate market is willing to pay for the newly issued treasury bills. Sometimes FED increases interest rates and at the same time treasury department reduces taxes or sends money to people through checks and direct deposits to reduce interest rates. Both are indepenent arms of the governent and don't have to follow each other.
my question is that on the treasury bond point you said that it is part of fiscal policy, but open market operations that is buying and selling of treasury bills is done of the Central bank na on behalf of the central government so the treasury rate should be impacted because of change in fed rate
@visiontobemillionaire the Treasury Department publicly auctions off new issue T-Bills through TreasuryDirect weekly in short maturity lengths of four-week, eight-week, 13-week, 17-week and 26-week; 52-week bills go to auction every four week. When you buy, your money will go the Federal Government and the President will spend that money on people's welfare or even on military and wars. However, you will buy only if the interest rate is attractive for you. Thus it is the market demand for treasury bills and supply of treasury bills that determines T-Bill interest rates. The supply of T-Bills is determined by the US President and FED has no role in that decision. That is not the case with FFR decision by FED. It is their FOMC that determines Federal Funds rates and discount rates. The market has to follow these rates. To answer your question, if FED feels that market determined treasury rates are too high because of low market demand, FED under its open market operations, will buy treasury bonds to reduce the treasury interest rates and vice versa. Hence trasury rates are market determined and completely independent of FED decisions. Through its open market opearations, FED can change the interest rates by increasing or decreasing market demand for treasury bonds, but FED does not know how much interest rate market is willing to pay for the newly issued treasury bills. Sometimes FED increases interest rates and at the same time treasury department reduces taxes or sends money to people through checks and direct deposits to reduce interest rates. Both are indepenent arms of the governent and don't have to follow each other.