| How does the sale 10 yr treasury Bond affect interest rates?

How does the sale 10 yr treasury Bond affect interest rates?

J.P. asked:


I know when Yields go down, rates go down. What I dont understand is if the fed is buying 11b in 10 yr treasuries wouldnt that make yeild go up forcing rates up?

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One Response to “How does the sale 10 yr treasury Bond affect interest rates?”

  1. Ed Atun on June 12th, 2009 2:09 am

    Yes. Any time there are more buyers for a bond, the prices go up and the yields go down. The seller of the bond does not have to pay much if the bonds are so popular that everyone wants them.
    The seller has to pay more interest when no one is interested in buying the bonds. He is trying to attract more buyers.
    The 10 year bond is used to set mortgage rates. Usually the mortgage rates are 1.5% higher because a home loan is riskier than a USA bond.