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Bond Market

In: Business and Management

Submitted By robert123
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Bond Markets
A bond is a debt security, or basically a loan, that an investor makes to a corporation, a government, an agency, or municipalities. In return for up-front cash, a corporation or government promises to make specific payments to a bondholder on specific dates. The bondholder can not only expect fixed payments but also the principle repayment when the bond reaches its maturity date (The Bond Market, 2002). A bond is considered a fixed-income security because the investor knows the exact amount of cash that will be paid back if the bond is held until maturity.
A bond market is a financial marketplace where investors can purchase and sell various types of bonds or debt securities. It can be categorized into three main groups: issuers, underwriters, and purchasers. Issuers sell bonds or other debt securities in the bond market to finance the operations of their various organizations. The main issuers of the market are governments, banks, and corporations. Underwriters are traditionally made up of investment banks and other financial institutions that help the issuer to sell the bonds in the market. The need for underwriters is the greatest for corporation debt market because there are more risks involved. Purchasers are made up of those who buy the debt being issued in the market. They can include not only every group mentioned but also any other type of investor, including the individual. The largest player in the market is governments because they borrow and lend money to other governments and banks and often purchase debt from other countries. (Who are the key players?, 2007)
There are bonds available today to satisfy almost any investment objective and to suit just about any investor, whether individual or institutional. The bond market is divided into four major segments: treasuries, agencies, municipals, and corporates. Treasury bonds are issued…...

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