{"id":40119,"date":"2017-09-20T02:00:41","date_gmt":"2017-09-20T06:00:41","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=40119"},"modified":"2017-09-11T09:09:21","modified_gmt":"2017-09-11T13:09:21","slug":"intro-to-the-bond-market","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2017\/09\/20\/intro-to-the-bond-market\/","title":{"rendered":"Intro to the Bond Market"},"content":{"rendered":"<p align=\"center\"><iframe loading=\"lazy\" width=\"853\" height=\"480\" src=\"https:\/\/www.youtube.com\/embed\/O7ww0gQwuhI\" frameborder=\"0\" allowfullscreen><\/iframe><\/p>\n<blockquote><p><strong>Published on 12 Jul 2016<\/strong><\/p>\n<p>Most borrowers borrow through banks. But established and reputable institutions can also borrow from a different intermediary: the bond market. That\u2019s the topic of this video. We\u2019ll discuss what a bond is, what it does, how it\u2019s rated, and what those ratings ultimately mean.<\/p>\n<p>First, though: what\u2019s a bond? It\u2019s essentially an IOU. A bond details who owes what, and when debt repayment will be made. Unlike stocks, bond ownership doesn\u2019t mean owning part of a firm. It simply means being owed a specific sum, which will be paid back at a promised time. Some bonds also entitle holders to \u201ccoupon payments,\u201d which are regular installments paid out on a schedule.<\/p>\n<p>Now \u2014 what does a bond do? Like stocks, bonds help raise money. Companies and governments issue bonds to finance new ventures. The ROI from these ventures, can then be used to repay bond holders. Speaking of repayments, borrowing through the bond market may mean better terms than borrowing from banks. This is especially the case for highly-rated bonds.<\/p>\n<p>But what determines a bond\u2019s rating?<\/p>\n<p>Bond ratings are issued by agencies like Standard and Poor\u2019s. A rating reflects the default risk of the institution issuing a bond. \u201cDefault risk\u201d is the risk that a bond issuer may be unable to make payments when they come due. The higher the issuer\u2019s default risk, the lower the rating of a bond. A lower rating means lenders will demand higher interest before providing money. For lenders, higher ratings mean a safer investment. And for borrowers (the bond issuers), a higher rating means paying a lower interest on debt.<\/p>\n<p>That said, there are other nuances to the bond market\u2014things like the \u201ccrowding out\u201d effect, as well as the effect of collateral on a bond\u2019s interest rate. These are things we\u2019ll leave you to discover in the video. Happy learning!<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Published on 12 Jul 2016 Most borrowers borrow through banks. But established and reputable institutions can also borrow from a different intermediary: the bond market. That\u2019s the topic of this video. We\u2019ll discuss what a bond is, what it does, how it\u2019s rated, and what those ratings ultimately mean. First, though: what\u2019s a bond? It\u2019s [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":35193,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25],"tags":[71,571,1093],"class_list":["post-40119","post","type-post","status-publish","format-standard","hentry","category-economics","tag-debt","tag-investment","tag-macroeconomics"],"jetpack_featured_media_url":"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2016\/06\/favicon.png","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-ar5","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/40119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=40119"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/40119\/revisions"}],"predecessor-version":[{"id":40120,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/40119\/revisions\/40120"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media\/35193"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=40119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=40119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=40119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}