Is it necessary to pay the Federal Reserve when the bond it holds matures?
Posted: 31 Jul 2017 01:29
Hi,
Is it necessary to pay interest on the bond that the Fed holds? Suppose, in order to increase the money supply the Fed buys a bond of $1 billion in the open market. Now the bond is back to US government (The Federal Reserve). The US government (US Treasury) itself created the bond in first place. Hence I think it is not necessary to pay the interest/principal on that bond. Is this assumption correct?
Is it necessary to pay interest on the bond that the Fed holds? Suppose, in order to increase the money supply the Fed buys a bond of $1 billion in the open market. Now the bond is back to US government (The Federal Reserve). The US government (US Treasury) itself created the bond in first place. Hence I think it is not necessary to pay the interest/principal on that bond. Is this assumption correct?