What the bond market?
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A bond is a debt instrument or security where the holder of the purchaser or the holder expects to repay the principal and interest at maturity (a date in the future). The bond market is a financial market where these bonds are bought and sold. To obtain an estimate of the size of the debt securities in these markets, you should keep in mind that the international bond market is about a trillion and the size of U.S. debt in the bond market is 0.2 trillion dollars.
How do these markets structured?
Very different from the stock, futures and options, most of the trading volume in bond markets is between dealers and large financial institutions in the OTC market. But a couple of bonds, especially those of companies listed on stock exchanges. This is partly due to differences in the obligations.
What are the different types of bond markets?
The Securities Industry and Financial Markets Association (SIFMA) classifies the bond market in the following categories:
1)
business
In simple terms, the debt of companies are IOUs issued by companies so that they can use that money to support their daily operations and generate more profits in the future. All kinds of debts of companies in business problem. These could vary from industry, financial companies in the service of those />
2) Government and the Agency
As its name suggests, the public debt and the agency is issued by the various government-sponsored enterprises (GSE). These entities were created by Congress to fund loans at affordable rates to certain types of borrowers (such as students, farmers and owners). GSE rely heavily on debt financing for their daily operations. Some examples of GSE in this - Fannie Mae, Sallie Mae, Federal Farm Credit Bank system etc.
3) Municipal
Municipal securities are debt securities issued by counties, cities, states and other government entities to raise money to build / maintain infrastructure such as roads, schools, hospitals and drainage systems. This may be the governments of the state and local U.S. finance their cash needs. A great appeal of investing in municipal bonds is that interest on these securities are exempt from federal income.
4) Mortgage-backed securities and asset-backed securities
Financial institutions issue debt in mortgage debt to those interested in property mortgages. These are loans that are used to finance the purchase of the borrower's home or other real estate. As the underlying loans (mortgages) are paid, investors receive interest payments in addition to their principal being paid.
Some examples of organizations that issue these debt securities are -. Ginnie Mae (Government National Mortgage Association) Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation)
Asset-backed securities (ABS) are similar in mortgage-backed securities in that they represent an interest in a variety of assets such as car loans, car leasing, home equity loans, or receivables credit cards. Investors in these debt securities receive interest payments in addition to their principal as the underlying loan is paid.
In summary, you learned that the bond markets are the different types of bond markets and the various players in these markets.
http://www.bond-trading.org for more articles on What is a junk bond .
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