BOND MARKET


The bond market which is popularly known as Debt market, Credit or Fixed Income market is a platform where there are market participants in the form of buyer and seller buying and selling debt securities which usually are in the form of bonds. Bond market is often used as reference with respect to Interest rate or the Yield Curve graph since there is an inverse relationship between interest rate and bond valuation. Bond market usually means Government bond market & Government backed ones because of its size, nature of liquidity, absence of credit risk and hence response to change of interest rate.

Data shows that international bond market size has been around $ 50 trillion in 2006/07, while the USA bond market debt outstanding amount around $26-$27 trillion. Estimated data as of early 2007 shows that daily trading volume in USA hovers around $900 billion, transactions largely occurs around among broker – Dealer and Institutional Participants which is otherwise termed over the counter (OTC) market.
Bond/ Debt markets are mainly decentralized and absences of certain exchanges like cash, future and commodity markets. This has occurred as no two bond issues are exactly alike, and the number of different outstanding securities is far larger.

Market Structure
Market participants are essentially either Buyers (debt issuer) of funds or sellers (institution) of funds or often both.
Categorizing Participants:-
• Institutional investors
• Governments
• Traders
• Individuals

Investment in Bond market
Financial Institutions or Investment companies allow individual investors to participate in the bond markets through bond funds, funds of closed-end variant and unit-investment trusts.
To brush through Bond market often we come across Primary market, secondary market.
The Primary market deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funds through bond issuance. The Secondary market refers to the stage where previously issued financial tools like stocks, securities, bonds, futures and options transactions take place. Dealers out here in this market are often referred to as Satellite Dealers and here new investors can purchase from other investors in the secondary market or the aftermarket.


Thanks,
Pamela

HEDGE FUNDS

While there can be numerous ways & tools of investment,let us take a snap shot of one financial product which has strong presence but not with too much fan following and it is hedge funds.
Hedge fund is an investment type of unique approach and can be said as financial tool with diversified activities quite different from any other fund type as well as it is accessed by limited number of investors as per regulation.
Considered as class investment taking into account shares, debt instruments, commodities, and various asset classes into its portfolio, hedge fund have its orientation quite different from each other visible from their objectives hence adheres to with different methodology in approaching investment.
Why Hedge??
These funds often seek to pacify potential losses in the markets they invest in by hedging their investments using a variety of methods, most notably short selling. Over the period of time, however, though said that hedging reduces risk but itself the process of hedging
actually increases risk with expectation of capital appreciation.
Hedge funds meant for certain elite society and provides them with an exemption in many jurisdictions from regulations over short selling, leverage, fee structures derivative contracts, and the liquidity of interests in the fund.
Structure of Hedge Fund
A hedge fund is a tool of investing where money is pooled. Other than fund asset portfolio and cash money there is no other asset holding for the fund investment while its investors are its clients.
Talking about the service providers they are:-
Broker: Service provided against prime brokerage includes money lending, standing as counter party for derivatives, transaction of securities for short selling, clearance and settlement. Brokers popularly termed prime brokers acted as prime functionary as that of bank.
Administrator: They function mainly as operational back bone of the fund by processing
Purchase, redemption requests, issuance of interest, computing NAV.
Distributor - They are responsible for marketing the fund to potential investors and mobilization of cash fund for investment. Frequently this role is taken by the hedge fund manager.