Question 4

a)The Australian Government is intending on making a large cash investment in June and July of 2023. As a consequence, the government will have a short-term shortfall of $6.2 million between cash receipts and expenditures. The government is intending to meet this shortfall by issuing 180-day Treasury Notes today. Explain if there will be any effect of an increased government bond issuance on corporate bond issuance and corporate bond prices.

b) Discuss the process through which the Australian Federal Government issues debt securities to the market. In your answer, discuss the bidding process and what determines the yield at which treasury securities are issued.

c) The reserve bank is buying a large amount of government securities in the market. What is the impact on interest rates?