The Impact Of Bond Market On European Government Debt Problems

1726 Words Jan 5th, 2016 7 Pages
2. The Impact of Bond Market on European Government Debt Problems
2.1. Bond Market

The bond market is one of the fixed-income markets that it is deals in with transaction of long term fixed-income securities. Moreover, the bond is one of the financial instruments and then the financial instruments are generally regarded as securities. In the bond market, there are two bonds familiar to mass investors. One is called government bonds, and another one is called corporate bonds. Firstly, as its name, government bonds are issued by government with maturities up to about 30 years. Usually, medium term bonds and long term bonds pay out fixed amounts of coupon payments in semi-annually during the repayment period. But, the index-linked bonds pay out alterable amounts of coupon payments in semi-annually because of the changes in inflation. The reason of government bonds are always have a lot of attraction to investors is that investors are generally referred to government bonds as bonds being free from default risk. With this characteristic, government bonds are safer than most other financial instruments to invest. However, the high return always with the high risk and vice versa that government bonds offers lower yields. Secondly, the corporate bonds is the another one that are concerned more by investors in daily transaction activities. There are three main sources for corporates to raising finance for their investment projects, they are: retained earnings, non-marketable debt…
Open Document