Indeed, measured by the metric of fresh supply of government paper, the borrowing this year will be higher than in last year, and this perhaps will be a more influential determinant of the yield trajectory. Meanwhile, the economic conditions have changed since last year in important ways. First, inflationary pressures are stronger, thereby restraining the flexibility for infusing liquidity through open market operations (OMO).
The latter, in turn, would help make loans to households and firms more attractive, and reduce the share of government debt in banks’ balance sheets.