European Bond Market Structure
| Due to many reasons unknown, bond markets have never been studied in great detail. However, bond markets have a significant role to play in determining the financial and economic status of a country. |
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Changes and fluctuations in the bond markets affect a variety of sectors including the prices, different assets, bank interest rates, corporate sector’s investment portfolios and even household savings. In this regard, bond markets hold a phenomenal place in determining a country’s future.
Unlike stock markets, bond markets function in a different style. These markets primarily concentrate on bringing lenders and borrowers together. According to bond market terminology, lenders are those who provide the investment and borrowers are those who issue bonds. Bond markets are considered to be extremely liquid, stable and active. Inside a stock market, stocks are listed on an exchange and trading is conducted on electronic limit-order books. In case of bonds or securities, trading is mostly over-the-counter (OTC). Only a small number of corporate bonds are listed on the exchange.
The two most important bond markets around the globe are that of the United States and Europe. United States has the largest centralized bond market in the world with an outstanding debt of more than $25 trillion. In Europe, size of the bond market is equally huge. Approximately, two-thirds of total amount of outstanding securities are in the form of bonds in the European bond market. However, there are certain differences in the way European bond market functions in comparison with the US bond market. The most important difference is the way in which total debt is distributed. In the US, the bond market mostly refers to corporate bonds. Apart from these, other major players in the US bond market are the municipal bonds and agency bonds. In Europe, the bond market is primarily dominated by bonds issued by the government and other financial intermediaries.
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European Bond Market Structure