What is “BOND”?

In finance, a bond is a debt security, in which the authorized issuer

owes the holders a debt and, depending on the terms of the bond, is obliged to pay

interest and/or to repay the principal at a later date, termed maturity.

What is “BOND MARKET”?

The bond market is a financial market where participants buy and sell

debt securities, usually in the form of bonds.

As of 2009, the size of the worldwide bond market is an estimated $82.2 trillion.

Domestic Bond :

For Example:

Amoco Canada issues a bond in Canada for placement in the

Canadian domestic market, i.e., with investors resident in Canada.

Foreign Bonds:

For Example:

Amoco Canada, a foreign corporation, issues bonds in the U.S.

for placement in the U.S. market alone.

International Bonds:

For Example:

Amoco Canada, a foreign corporation, issues bonds, in a major

international financial center, to be placed internationally.

International BOND MARKET

International Bond Market is very big and has an estimated size of nearly

$47 trillion.

The size of the US bond market is the largest in the world. The US bond

market's outstanding debt is more than $25 trillion.

The international bond market allows investors to choose between low risk

and high risk investments. This allows a diverse portfolio and a wide range of

investment returns. Because all transactions are done electronically, the international

bond market is very convenient for investors.

Types of bond markets

The Securities Industry and Financial Markets Association (SIFMA) classifies the broader bond

market into five specific bond markets.

I.Corporate Bond Market

II.Government Bond Market

III.Municipal Bond Market

IV.Mortgage backed and collateralized debt obligation Bond Market

V.Funding Bond Market

{1} Corporate Bond Market:

A corporate bond is a bond issued by a corporation. It is a bond that a

corporation issues to raise money in order to expand its business.

{2} Government Bond Market:

A government bond is a bond issued by a national government denominated in

the country's own currency. Bonds issued by national governments in foreign

currencies are normally referred to as sovereign bonds.

The first ever government bond was issued by the English government in 1693

to raise money to fund a war against France. It was in the form of a tontine.

{3} Municipal Bond Market:

A municipal bond is a bond issued by a city or other local government, or their agencies.

{4} Mortgage backed and collateralized debt obligation bond market:

A Mortgage-Backed Security (MBS) is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans, most commonly on residential property.

Collateralized Debt Obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets.

{5} Funding Bond Market:

Bond issue for collecting fund for expansion of business.

Redeemable bond:

A bond which the issuer has the right to redeem prior to its maturity date,

under certain conditions.

Irredeemable bond:

Bonds with a fixed maturity but not subject to prior redemption; bonds that

cannot be called for redemption by the issuer (payer or obligor) before maturity.

Convertible bond:

A convertible bond (or, if it has a maturity of greater than 10 years, a

convertible debenture) is a type of bond that the holder can convert into shares of common

stock in the issuing company or cash of equal value, at an agreed-upon price.

bond market participants

1.Institutional Investors

2.Governments

3.Traders

4.Individuals

Participants include :

bond market size

Amounts outstanding on the global bond market increased 6% in 2008 to $83 trillion.

Domestic bonds accounted for 71% of this and international bonds the remainder.

Domestic bond market stocks increased 7% during the year 2008, largely due to an

increase in government bonds.

The US was the largest market for domestic bonds in 2008 accounting for 43% of

amounts outstanding followed by Japan with 16%.

In Europe, public sector debt is substantial in Italy (103% of GDP), Germany (61%),

and France (58%) with government borrowing set to increase in the next few years.

The UK overtook the US in 2008 to become the leading centre globally for amounts

issued with 30% of the global total.

Amounts outstanding on the international bond market increased 5% in 2008 to $23.9

trillion

Bond Investments

Bond indices

Bond Market Bond Market

vs. vs. Stock MarketStock Market

Amounts of Domestic and International Bonds Outstanding

• Currency Distribution of International Bond market Amounts Outstanding

By: Sorathiya Ashish