Bonds and mortgage markets

Bonds and mortgage markets Name: Course: Instructor: Date: Bonds and mortgage markets The bond and mortgage market also known as the fixed income or credit market, is a financial market where participants can issue new debt (primary market), or sell and buy debt securities (secondary market) usually in the form of bonds (Madura, 2008). Its aim is to provide a system for long-term funding of private and public expenditures. There are two main types of bonds and are all defined by the seller of the debt. Government bonds are called treasuries because the Treasury Department sells them while companies sell corporate bonds. The bond rating shows the credit worthiness of government or corporate debt issues. They are expressed in the form of letters, and they vary from ‘AAA’, which is the highest rank to ‘C’ also known as junk, the lowest grade (Madura, 2008). The same letter grades are used for rating different services the only difference being the use of combinations of lower and upper-case letters to differentiate the bond ratings. The type of bond states where one can purchase them, federal bonds are sold by the federal government while local municipalities or state governments sell those of municipal (Madura, 2008). Investors can purchase in brokerages or banks, website or Federal Reserve Bank. The company usually advertises the corporate bonds for sell while the location for purchase is indicated in advertisements. The difference in a bond market and that of a mortgage market is that the bond market refers to the place where investors buy and re-sell debt securities while in a mortgage mar...