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Types of bond markets
The Bond Market Association classifies the broader
bond market into five specific bond markets.
Corporate, Government & Agency, Municipal,
Mortgage Backed, Asset Backed, and Collateralized Debt Obligation, Funding
Bond
market participants
Bond market participants are similar to
participants in most financial markets and are essentially either buyers (debt
issuer) of funds or sellers (institution) of funds and often both.
Participants
include:
Institutional investors; Governments; Traders;
and Individuals
Because of the specificity of individual bond
issues, and the lack of liquidity in many smaller issues, the majority of
outstanding bonds are held by institutions like pension funds, banks and mutual
funds. In the United States, approximately 10% of the market is currently held
by private individuals.
Bond
investments
Investment companies allow individual investors
the ability to participate in the bond markets through bond funds, closed-end
funds and unit-investment trusts. In 2006 total bond fund net inflows increased
97% from $30.8 billion in 2005 to $60.8 billion in 2006. [4] Exchange-traded
funds (ETFs) are another alternative to trading or investing directly in a bond
issue. These securities allow individual investors the ability to overcome large
initial and incremental trading sizes.
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