Understanding of fixed income securities. Fixed income securities are the investment alternatives generating predetermined fixed income to the investors. Bonds and debentures offer the investors the opportunity to earn stable nominal returns with low risk of loss of principal if held to maturity. Nevertheless bonds also offer investors the chance to earn more returns by speculating on interest rate movements. Although bonds and debentures are long-term fixed income securities, both of them are debt securities. Bond Markets .
Basically, Bond market includes corporate debt securities and government-issued securities , facilitating the transfer of capital from savers to the issuers or organizations requiring capital for government projects, business expansions and ongoing operations.
The Bond Markets are also can be called as the debt markets or credit markets. Basically, bond market is a financial market where participants are provided with the trading of debt securities.
Generally speaking debt securities issued by government and public sector units are commonly known as bonds. On the other hand, debt securities issued by private sector joint stock companies are called debentures. A debenture is also called an unsecured bond backed by general credit of a company. However, bonds and debentures are often used interchangeably. Bonds can be defined as the long-term debt instruments which represent a contractual obligation to pay both principal and interest thereon by the issuer to the holder. Two major categories of bonds available in the securities markets are government bonds and corporate bonds. The holder of bonds can sell them off any time before maturity although no maturity the issuer reimburses to the holder. If a bond is going to be sold before maturity, the price will depend on the level of interest rates at that time. Therefore, the buyers of the bonds are exposed to interest rate risk. So, on the part of the buyers and sellers of bonds it is essential to understand the fundamentals of bonds how to price, analyze, and manage them.