Debt Market
Debt Market
Debt Market
Debt Market:
The debt market is a marketplace for trading of debt securities. Investors buy debt securities issued by
companies and governments. The issuers sell securities to raise capital and use it to fund business
operations, infrastructure development, and other purpose. The debt market facilitates the sale and
purchase of government bonds, corporate bonds, treasury bills, and notes.
Features/Characteristics of Bond:
a. Bond Issue Date
The bond issue date is the date that the bond is issued and available for purchase by creditors. Interest
accrues from this date.
b. Bond premium: The amount by which the current price of a bond exceeds its face value. When the
market required rate of return is less than the stated coupon rate, the price of the bond will be more than
its face value. Such a bond is said to be selling at a premium over face value. The amount by which the
current price exceeds the face value is the bond premium.
c. When the market required rate of return equals the stated coupon rate, the price of the bond will equal
its face value. Such a bond is said to be selling at par.
d. If interest rates rise so that the market required rate of return increases, the bond’s price will fall. If
interest rates fall, the bond’s price will increase. In short, interest rates and bond prices move in opposite
directions.