What determines the interest rates of government bonds?
It's not clear to me how the interest rate of a specific government bond changes. I would like to make a comparison with cryptocurrency exchanges.
Consider, for example, the price of bitcoin on kraken. It changes on the basis of the price of the last trade executed. If a trade was executed at 1000$ at 10AM and I checked the price at 10:05, I would get 1000$. Next, a trade was executed at 1005$ at 11AM, checking again at 11:05 would return 1005$. I hope you get what I mean.
Now, do bonds work the same? I can imagine there are people selling on the secondary market at given interest rates, therefore the rate changes on the basis of those trades.
Also, bitcoin can have different prices on different exchanges, is it the same for bonds?
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I can imagine there are people selling on the secondary market at given interest rates, therefore the rate changes on the basis of those trades.
No - the rate for a given bond is fixed, and is set by the entity that issued the bond (there are floating-rate bonds, but the rate is not determined by the market for that bond, but rather by some other "reference" interest rate like SOFR). What changes in the yield, or how much return you get if you hold the bond to maturity (and the guarantor doesn't default). Since you can buy a bond for more or less than its face value (e.g. ,000 for US Treasury bonds), your actual return can be more or less than the stated interest rate. If you buy a bond for less than face value, you get the interest plus the difference between the face value and what you paid for it, so you get a higher yield.
Also, bitcoin can have different prices on different exchanges, is it the same for bonds?
Most bonds are not traded on exchanges - they are traded OTC between bond dealers. But yes you can have different bid/ask prices between dealers.
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