Unlike Equity and Money markets, there is no specific bond market to trade bonds. However, there are domestic and foreign participants who sell and buy bonds in various bond markets.
A bond market is much larger than equity markets, and the investments are huge too. However, bonds pay on maturity and they are traded for short-time before maturity in the markets.
Bonds also have risks, returns, indices, and volatility factors like equity and money markets. The international bond market is composed of three separate types of bond markets: Domestic Bonds, Foreign Bonds, and Eurobonds.
Domestic bonds trade is a part of the international bond market. Domestic bonds are dealt in local basis and domestic borrowers issue the local bonds. Domestic bonds are bought and sold in local currency.
In foreign bond market, bonds are issued by foreign borrowers. Foreign bonds normally use the local currency. The concerned local market authorities supervise the issuance and sale of foreign bonds.
Foreign bonds are traded in the foreign bond markets. Some special characteristics of the foreign bond markets are −
● Issuers of bonds are usually governments and private sector utilities.
● It is a standard practice to underwrite and organize underwriting the risks.
● Issues are generally pledged by the retail and the institutional investors.
In the past, Continental private banks and old merchant houses in London linked the investors with the issuers.
Eurobonds are not sold in any specific national bond market. A group of multinational banks issue Eurobonds. A Eurobond of any currency is sold outside the nation that has the currency. A Eurobond in the US dollar would not be sold in the United States.
The Euromarket is the trading place of Eurobonds, Eurocurrency, Euronotes, Eurocommercial Papers, and Euroequity. It is commonly an offshore market.