What is the main advantage of governments issuing fixed-rate debt when interest rates are rising?

The main advantage of governments issuing fixed-rate debt when interest rates are rising lies in the ability to lock in current interest rates, thus avoiding the higher costs associated with future borrowing. When interest rates are on an upward trajectory, borrowing at fixed rates becomes strategic; it allows the government to secure funding at set rates that are comparatively lower than what they may encounter later on.

By issuing fixed-rate debt, the government ensures that it can predict and manage its debt servicing costs over the life of the bond. This is particularly beneficial in an environment where market conditions suggest that rates are likely to increase. The certainty of fixed interest payments provides a stable financial planning framework. As interest rates rise, the cost to borrow at a fixed rate remains unaffected by fluctuations in the market, preventing unexpected increases in debt service requirements.

In contrast, other options focus on different benefits such as liquidity, foresight into interest rates, or payment deferral, which do not address the immediate advantage of capitalizing on current fixed rates to mitigate future expense increases.