Central banks are the only entity capable of printing money and increasing the supply. Bond markets reflect the faith in a governments ability to pay off its debts. In an absence of faith, the bond market falls, to avoid that outcome, the government buys into its own bonds. Central-bank buying accounts for $1.6 trillion — more than half — of the total demand for bonds in 2013... What’s more, central-bank buying, overwhelmingly from the Fed and the Bank of Japan, accounts for the lion’s share of official-sector buying Government or Sovereign Bond: A debt security issued by a government to support government spending, most often issued in the countrys domestic currency. Government debt is money owed by any level of government and is backed by the full faith of the government... Lending to a national government in the countrys own sovereign currency, government bonds, are free of credit risk, because the government can raise taxes or simply PRINT MORE MONEY to redeem the bond at maturity. - Investopedia
Posted on: Sat, 01 Nov 2014 18:15:22 +0000
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