“ helping to raise interest rates by sopping up liquidity”
Could you elaborate or be more specific on this part of your comment? Not sure I understand the terminology or the cause and effect assertion. Not that what you’re saying is not correct tho. The first part of your comment was certainly insightful.
In most cases, the dollars are soon recycled by the Treasury as government agencies spend them, so the net effect is usually nil. The Treasury has a large staff of analysts who try to assure that this is so if that is what the Treasury intends. They monitor the value of the dollar and of US debt and interest rates. When needed, the Treasury will buy or sell assets to protect against imbalances or unexpected movements.
What if the Treasury sells bonds and holds on to the dollar proceeds instead of releasing them to be spent by government agencies? When they do that, the stock of money in circulation -- the M1 money supply -- is reduced. Or, to put it casually, the Treasury has sopped up liquidity. The usual result is to move interest rates upwards as dollars become more scarce and their owners can extract a higher interest rate in return for lending them.
The opposite is also true. When Treasury on the net buys its debt in return for dollars, it is injecting dollars and dollar liquidity into the financial system and economy. Plausibly, the Treasury may create new dollars so the net effect is to create new demand. If done on a large enough scale, this tends to juice up inflation.