Credit Market

A Credit Market is a capital market where market participants trade credit market instruments (tradable debt securities).

• AKA: Bond Market, Fixed Income Market.
• Context:
  • It can range from being a Primary Bond Market (for new bond loans) to being a Secondary Bond Market (of existing bond loans).
  • It can range from being a Government Bond Market (for government bonds to being a Corporate Credit Market.
  • It can be categorized by a Credit Spread (between different bond types).
• Example(s):
  • a U.S. Credit Market, such as a U.S. non-financial credit market or a U.S. Treasury Bonds market.
  • a Junk Bonds Market (for junk bonds).
  • …
• Counter-Example(s):
  • a Stock Market, typically by Stock Exchanges.
  • a Derivatives Market.
  • a Commodities Market.
  • a Precious Metal Market, like a gold market.
  • a Money Market.
• See: Organizational Debt, Broker-Dealer, Over-The-Counter (Finance), Credit Risk, Credi SPread.

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References

2018

• "Stock Markets Are Wild, but Bond Markets Can Be Dangerous." In: The New York Times, (2018-12-18).
  • QUOTE: ... Bond markets dictate the cost of borrowing money, and that can determine actual economic activity. …

2015

• http://www.investopedia.com/terms/c/credit_market.asp
  • QUOTE:
    1. The credit market is a broad market for companies looking to raise funds through debt issuance. The credit market encompasses both investment-grade bonds and junk bonds, as well as short-term commercial paper.
    2. The market for debt offerings as seen by investors of bonds, notes and securitized obligations such as mortgage pools and collateralized debt obligations (CDOs).

2014

• (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/bond_market Retrieved:2014-6-22.
  • The bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, but it may include notes, bills, and so on. The primary goal of the bond market is to provide a mechanism for long term funding of public and private expenditures. Traditionally, the bond market was largely dominated by the United States, but today the US is about 44% of the market. As of 2009, the size of the worldwide bond market (total debt outstanding) is an estimated $82.2 trillion, of which the size of the outstanding U.S. bond market debt was 31.2 trillion according to Bank for International Settlements (BIS), or alternatively $35.2 trillion as of Q2 2011 according to Securities Industry and Financial Markets Association (SIFMA). Nearly all of the $822 billion average daily trading volume in the U.S. bond market takes place between broker-dealers and large institutions in a decentralized, over-the-counter (OTC) market. However, a small number of bonds, primarily corporate, are listed on exchanges.

    An important part of the bond market is the government bond market, because of its size and liquidity. Government bonds are often used to compare other bonds to measure credit risk. Because of the inverse relationship between bond valuation and interest rates, the bond market is often used to indicate changes in interest rates or the shape of the yield curve. The yield curve is the measure of "cost of funding".

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2020

• (Wikipedia, 2020) ⇒ https://en.wikipedia.org/wiki/bond_market Retrieved:2020-3-31.
  • The bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, but it may include notes, bills, and so on.

    Its primary goal is to provide long-term funding for public and private expenditures. The bond market has largely been dominated by the United States, which accounts for about 39% of the market. As of 2017, the size of the worldwide bond market (total debt outstanding) is estimated at $100.13 trillion, according to Securities Industry and Financial Markets Association (SIFMA). The bond market is part of the credit market, with bank loans forming the other main component. The global credit market in aggregate is about 3 times the size of the global equity market. Bank loans are not securities under the Securities and Exchange Act, but bonds typically are and are therefore more highly regulated. Bonds are typically not secured by collateral (although they can be), and are sold in relatively small denominations of around $1,000 to $10,000. Unlike bank loans, bonds may be held by retail investors. Bonds are more frequently traded than loans, although not as often as equity. Nearly all of the average daily trading in the U.S. bond market takes place between broker-dealers and large institutions in a decentralized over-the-counter (OTC) market. However, a small number of bonds, primarily corporate ones, are listed on exchanges. Bond trading prices and volumes are reported on Financial Industry Regulatory Authority's (FINRA) Trade Reporting and Compliance Engine, or TRACE.

    An important part of the bond market is the government bond market, because of its size and liquidity. Government bonds are often used to compare other bonds to measure credit risk. Because of the inverse relationship between bond valuation and interest rates (or yields), the bond market is often used to indicate changes in interest rates or the shape of the yield curve, the measure of "cost of funding". The yield on government bonds in low risk countries such as the United States or Germany is thought to indicate a risk-free rate of default. Other bonds denominated in the same currencies (U.S. Dollars or Euros) will typically have higher yields, in large part because other borrowers are more likely than the U.S. or German Central Governments to default, and the losses to investors in the case of default are expected to be higher. The primary way to default is to not pay in full or not pay on time.