### Increase interest rates and lower the price of bonds

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##### Reference no: EM131059630

The Treasury currently had a \$0.9 trillion dollar deficit in Fiscal 2013 so the US government was issuing new long term securities (borrowing to cover the deficit) at an average rate of \$75 billion per month. This decreases the money supply which should INCREASE interest rates and LOWER the price of bonds, yet long term interest rates were relatively stable. Why?

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