Also known as the debt market, the Bond Market is a dynamic financial market that allows participants to issue and trade debt securities. These exchanges play an important role in the economy especially since the primary objective of the bond market is to give access to long-term funding for both public and private expenditures. Financial services companies, including offshore investment firms like LOM Financial, look at the debt market as a major investment vehicle. Here are some of the most common types of bonds issued and traded in the credit markets.
Government bonds are issued by national governments but it can also be issued by lower levels of governments such as local and municipal entities. Basically, it offers bonds with periodic interest payments, initially attracting buyers, especially conservative investors, by presenting a face value on their agreed maturity dates. Municipal bonds, on the other hand, are issued by lower levels of government such as a state or a local government entity.
Corporate bonds cover a huge percentage of the entire bond market primarily because of the issuing capacities of large corporations – the bond’s main issuers. The debt securities, unlike the bonds issued by government entities, can carry a higher credit threshold and boasts the possibility to return higher yields – of course, with an equivalently higher risk.
There are other types of bonds that fall under the category, asset-backed securities. These are the kinds of bonds that are primarily issued by financial sector participants and banking institutions. An example of this type of debt security is mortgage bonds that rely on pooled mortgages from real estate properties. However, these bonds are usually reserved for institutional investors and not accessible to individual investors.