From the end of 2009 to the end of 2019, the size of the United States National Debt held by the public grew from $6.8 trillion to $17.2 trillion. During the same period, the 10 year US Treasury Bond yield to maturity fell from 3.59% in December 2009 to 1.86% in December of 2019. Explain how such an increase in the supply of government bonds can lead to a fall in the interest rate. Second, consider that the 10 year bond rate has fallen further in 2020 to 0.68 percent on October 1, despite a further increase in the national debt ($20.5 trillion as of June 30, 2020) due to the decline in the economy and increase in federal government spending. Why has this continued in 2020 during an economic crisis?
From the end of 2009 to the end of 2019, the size of the United States National Debt held by the public grew from $6.8 trillion to $17.2 trillion. During the same period, the 10 year US Treasury Bond yield to maturity fell from 3.59% in December 2009 to 1.86% in December of 2019. Explain how such an increase in the supply of government bonds can lead to a fall in the interest rate. Second, consider that the 10 year bond rate has fallen further in 2020 to 0.68 percent on October 1, despite a further increase in the national debt ($20.5 trillion as of June 30, 2020) due to the decline in the economy and increase in federal government spending. Why has this continued in 2020 during an economic crisis?
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