However it is incorrect to regard the money as the appropriate measure of the policy towards the increase in the interest rates, the interest rates are based on the supply of bonds, and rate of interest is regarded as the return on bonds, through bonds the evaluation of the liquidity effect can be exercised. The measurement of the money can be exercised through the non-borrowed reserves; the purpose of injecting the money can not be achieved through the withdrawal of say, Treasury bills. The injection of money can also be exercised through the purchase of long-term bonds, and this is expected to develop an impact on the short-term rates.
The bond market risk are associated with the occurrences when the agents allocate the funds towards the bond market without any evaluation and analysis of the purchasing and selling price of the bond afterwards. Such concerns are imminent because asset markets are considered to be incomplete and segmented. The risk within the bond market based on the supply of the bonds is experienced when the agents and dealers are willing to invest their resources in the trade market. ...Show more