Question

Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?

Answer 1

Prices would decline and interest rates would rise

Step-by-step explanation:

This is because the market will be flooded with additional 50 billion dollars of bond increasing the supply causing the price to fall. Interest rate are inversely proportional to prices thus interest rate will rise.