Chap 8

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CHAPTER 8

BOND MARKETS

CHAPTER OVERVIEW AND LEARNING OBJECTIVES

( This is the second of six chapters related to the study of financial markets. They are: (1) Money Markets; (2) Bond Markets; (3) Mortgage Markets; (4) Equity Markets (5) Derivatives Markets; and (6) International Markets.

( In part four and five of this text we will study specific financial institutions and their involvement (investing and/or financing) in various markets.

( The bond capital market finances "real investment," including commercial and consumer real estate construction, business plant and equipment, Federal Government deficit spending, and bridges, turnpikes, etc. of state and local governments.

( Long-term securities are purchased by capital market investors who desire income over the long term – pension funds, mutual funds, life and casualty insurance companies, and individuals.

READING THE WALL STREET JOURNAL

The Credit Markets column, located in the Money & Investing section (C), provides a daily analysis of major happenings in the U.S. credit markets. Included are discussions about new bond issues, changing rates, issues facing bond investors, etc. Want to understand what drives funds into and out of bond markets? Read this column daily and learn!

CAREER PLANNING NOTE:

Bonds are investment banks’ savior during the times when stock markets do not do well. It’s not only companies that use bonds to raise money – governments and government institutions do, too. Bonds come in different shapes and sizes, ranging from investment grade, issued by blue-chip companies, to high yield, which carry a greater risk. It is helpful to be quantitative, innovative, ambitious, and quick on your feet if you are looking for a career in fixed income securities.

ASK THE RIGHT QUESTIONS IN THE INTERVIEW

In any market, buyers and sellers need…...

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