So if a government wants to borrow money it issues bonds at a fixed interest rate at a certain maturity date? How does it know what to set that rate at? Bonds are sold on the secondary market at market value but that is just between private investors right?
How does the secondary market price impact how the government services its debt given they will just offer par 100 at 4%?
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The government has to match the secondary market. If they bring out bonds that perform worse than existing bonds then noone will buy them and instead grab existing ones from the secondary market instead.
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