That investor now has more money in their bank account, which does not pay them much of a return. This incentivises these investors to switch into other assets to earn a higher rate of return. This increases the price of other assets, such as equity prices and lowers interest rates on other fixed income assets. The bond investor might be a foreign investor.
They may choose to invest the money in assets in other countries which would lead to a lower exchange rate. [12] So bond purchases work through a number of channels to put downward pressure on interest rates for the government, households and businesses, as well as downward pressure on the exchange rate. There is also another important channel by which bond purchases operate.