The Supply of money and money Market Equilibrium · How Does the interest rateⅤ ariation Ensure the money market Equilibrium (mechanism analysis) ( Continued from the last page) Therefore in the bond market, there will be excess supply of bond. This will reduce the bond price and hence raise the rate of return on bond which 1s a measure of interest rateThe Supply of Money and Money Market Equilibrium • How Does the Interest Rate Variation Ensure the Money Market Equilibrium (mechanism analysis) – (Continued from the last page) Therefore in the bond market, there will be excess supply of bond. This will reduce the bond price and hence raise the rate of return on bond, which is a measure of interest rate