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The Structure of International Bond Market
The international bond market is an investment market just like the stock market, but there are some differences in the structure of these two markets. The usual trading of bonds occurs on the over the counter market, and not on the exchanges like stocks are. There are a few corporate bonds which are the exception, because these may be traded on the exchanges. Bonds are normally traded using networks, which are set up to utilize electronic trading. Unlike the stock market, whose physical location is on Wall Street, there is no physical marketplace for the bond market. Instead, computers and telephones are used to buy, sell, and trade bonds, including junk bonds and other types. The structure of the international bond market is all electronic.
The international bond market offers a large number of opportunities for investors. All portfolios should include a specific portfolio percentage that is invested in fixed income, which the international bond market can supply. Bonds can range from extremely low risk to extremely high risk, with risks at all levels in between. The international bond market, also called the global bond market, allows investors to diversify their portfolio, preserve their wealth, and see attractive returns on their investment. The structure of the international bond market means convenience when trading, because everything is done electronically. This market trades in a large number of bond types each day, and is separated into two distinct markets, the primary market and the secondary market. The primary bond market is where debt securities are issued by the entity and then sold to lenders, including the public. The secondary bond market is where the investors who have bought bonds from the issuing entity go to sell these bonds, and where buyers looking for these bonds go. The stock market is small compared to the international bond market, even though the stock market is more well known to the public.
More than sixty trillion dollars is the value of the international bond market, and there are bonds from many developing countries that may offer excellent returns. This is because international bonds from developing nations may be somewhat riskier. This means do your research and check out any country and company before you make an investment. The international bond market can present many opportunities to investors, but there are risks involved. Researching any bond thoroughly before making an informed investment decision will help you minimize these risks.
Investing in the international bond market can be somewhat confusing at first, but with time and practice this market can allow an investor the chance to get a good return while helping the development of other countries. With bonds, risk is in the form of the issuing entity not making good on the debt. Government agencies and companies issue bonds when funds are needed, and these are debt securities. If previously purchased bonds are sold after the interest rates have gone down, the bond is referred to as up. This is because the interest rate on the bond is higher than the current rate. If the interest rate goes up after the bond is issued, the bond is referred to as down.
The international bond market structure is continuously evolving and growing, and the number of bonds being traded is on the rise. This market is a good opportunity for investors to diversify their portfolio and invest in foreign markets at the same time. Low risk foreign bonds can be a great way to preserve wealth and minimize risks as well.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Bond Investment30 Dec 2008|