From the solution in ASET under the heading "supply and demand", it is indicated that the yield of bonds will be affected by supply and demand. For example, if the government issues a significant volume of bonds to fund a deficit then yields will reduce.
I was of the opinion that an increase in the supply of bonds with no changes in demand will cause a decrease in the price of bonds which will lead to an increase in the bond yields. I am not quite getting why the yields, in this case, will reduce with an increase in the supply of bonds.
I was of the opinion that an increase in the supply of bonds with no changes in demand will cause a decrease in the price of bonds which will lead to an increase in the bond yields. I am not quite getting why the yields, in this case, will reduce with an increase in the supply of bonds.