In other words, investors believe that there is no chance that the U.S government will default on interest and principal payments on
the bonds it issues.
Also, local and state governments often exempt investors from taxes on
the bonds they issue.
The supply curve is essentially vertical as the Government needs to fund a given deficit with bond issuance irrespective of the price of
the bonds it issues.
Companies seek new capital for various reasons, and
the bonds they issue are debt securities guaranteed by their capital assets, and physical and non-physical securities.
Some investors argue that capping taxpayer rescue funds, while releasing Fannie and Freddie to private shareholders like Paulson could upend the $ 5 trillion market for
the bonds they issue.