How Is the Equilibrium Interest Rate Determined in the Bond

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The Answer is In layman terms, equilibrium means where the demand and supply are equal or where two things converges. The interest rates are also stated as per the equilibrium prevailing in the market. Hence the interest rates can be above or below the equilibrium price tempoarrily, but the need to converge towards the equilibrium in longer terms or towards their mayturity.if the interest rates are above the equilibrium rate they will tend to decline towards the equilibrium as they approaches maturity or in near terms. Same happens when the interest rates are below the equilibrium rates they will tend to increase towards the equilibrium rate. Hence its a rule of thumb we can say, that the interest rates in the bond markets whetehr in US or glibally are determined on the basis of equilibrium rates prevailing in the markets.

How Is the Equilibrium Interest Rate Determined in the Bond

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