Finance, Forex and Investments

Why would a central bank buy bonds directly from a government?

This seems weird to me. I thought the primary market was when the government sold bonds to the public. The secondary market was when the NY Fed sold and resold them in NY. But I think my understanding is wrong: does the primary market consist of the government selling bonds to its central bank, not the public?

Public Comments

1. The primary market is the auction the government holds to sell bonds. The point where your confusion arises is the US government does not own the Federal Reserve it is a corporation owned by stock holders.
2. My understanding is the same as yours. I don't think the fed buys bonds in the government auctions but they may increase liquidity in the system to facilitate the sales by buying previously issued bonds.
3. Buying bonds is a way for the central bank to inject cash into the credit markets, selling them is a way to take cash out of the market. Primary and secondary markets are not the issue, liquidity in the credit markets is the issue.