What is a Credit Market?

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What is a Credit Market?

The credit market is also called debt market or bond market which plays a very significant role from the perspective of financing and investing respectively for corporations as well as individuals. It is a financial market where borrowers can issue new debt in the primary market, subsequently buy and sell securities in the secondary market.

Why use credit market?

The maturity of the bonds are usually more than one year and used for raising capital while providing interest to the other party. Investors take advantage of credit market for earning money. The financial instruments of credit market can be considered safer than investing in stocks, because investors receive fixed interest and if company happen to go insolvent or bankrupt bondholders get priority before shareholders.

Who are the participants of credit market?

Typically, there are two parties involved in the credit market in order to make any transaction successful. In a lay man term, one party is issuer of debt securities (government, corporations) while another party is the purchaser of securities (individuals like you and me).

Where credit market instruments are being traded?

When it issues very first time, it is only traded in primary market. Afterwards, it will continue to be traded in the secondary market either in the form of Over The Counter (OTC) transactions or Organized Exchanges (Bond Market).

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