Question

Describe the market for bonds and discuss the difference(s) between government and corporate bonds.

Answer 1

Market for bonds will be a market where various kinds of debt securities which will be fixed income market securities or credit market securities will be transacted and government will be typically issuing bonds in order to raise capital and publicly traded company will also issue bonds in order to Business expansion.

Bond market have been really defined as primary market and secondary market. the primary market is referred to issuance of new securities in the market which will be directly between Bond issuers and Bond buyers whereas secondary markets will be reflecting all those bonds which have already been sold in the primary market and then they are bought and sold by market participants.

Market for bonds will be providing various companies and government an opportunity to raise short term as well as long term money and these will be helping in in in Business expansion for companies where as this will also help to finance infrastructural improvement for government.

Difference between Bond Government Bonds and corporate bonds are as follows-

A.Government Bonds are basically less risky and they are even risk free in nature whereas corporate bonds are having risk attached to them and they are more risky than the Government Bonds.

B.Government Bonds will be having a higher credit rating whereas corporate bonds will generally be having a lower credit rating due to lesser amount of credit risk associated with government Bond.

C. Corporates Bond will be paying higher amount of interest because there is risk involved in the corporate bonds and Government Bonds will be generally paying a lower amount of interest rates.

D.the chances of default on corporate bonds is very high whereas the chances of default on government bond is very low.