The bond markets

A Bond is a long-term debt commitment secured through an asset or a promise to pay. It is a loan acquired with the intention of either selling or buying. The certificate of the bond can act as evidence of the lender-creditor relationship. A bond market is a financial market where parties usually trade debt securities in the form of bonds.

The global bond market, as of 2006, was estimated to be worth $45 trillion. The US bond market alone contributed around $25.2 trillion of the total amount of debt. Almost all of the daily trading volume in the US bond market happens in a decentralised, over-the-counter (OTC) market. Majority of the trades are between broker-dealers and large institutions such as insurance companies and pensions funds. Broke dealers bid for bonds which investors are willing to sell, and when the investors want to buy the bonds, they offer them from their inventory. It is evident that trading interest is the backbone of any transaction in the conventional system of issuance of bonds. However, som

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