How are sovereign bond interest rates determined?

Question

They are a lot of questions about the price of a bond or its yield.

• How would bonds fare if interest rates rose?
• Why would I not buy a bond for less than face value?
• Why invest in long term government bonds when the yield curve is inverting?
• What determines the interest rates of government bonds? (OP ask for the price movement of the bond, not the interest as stated in the title)
• ... and so on

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Mine is specifically about the interest rate (the coupon):
How does a government (or its central Bank) determine the price of the coupon when issuing a new bond? Mine is specifically about the interest rate (the coupon): How does a government (or its central Bank) determine the price of the coupon when issuing a new bond?

Why would a country want to pay a 1% coupon if few month before they had a negative 0 fees debt? (assuming a 0% or negative interest rate)

Is it related to the bank rate (EONIA/ESTER) or the "urgency" for the government to issue more debt at a given time?

Edit: the charts I linked was yield instead of coupon gross value, thank you @quid for noticing.

Answer 1

New bonds are almost always issued in auctions. So the coupon rate is determined by the lowest rate that enough investors will take in order to sell whatever amount of bonds the country wants to sell. If a country wants to sell $10 M in bonds, for example, and investors bid to buy $2.5 M @ 0.125%, $5 M @ 0.25%, and $2.5 M @ 0.275%, the bonds will be issued at 0.275% (every investor gets the same price if their bids are accepted).

Most countries sell bonds on a regular schedule. You can look here for example for the issuance calendars for the various EU member nations. Barring something exceptional happening in the market, countries are generally going to need regular debt issuances to fund their ongoing operations and aren't usually trying to time the markets.