belgiumfr
Credits investing glossary

Credit markets

The credit market is the mechanism through which new debt can be issued or in which existing debt can be traded. As the bond market represents the dominant portion of the credit market, the terms ‘bond market’, ‘debt market’ and ‘credit market’ are often used interchangeably.

Credit markets and equity markets make up the capital market. The credit market represents the largest portion: the size of the global bond market is estimated at USD 102.8 trillion,** compared with the global equity market capitalization of USD 74.7 trillion.**

Consistently at the forefront of credit management
Consistently at the forefront of credit management
Credit investing

Issuance in the primary market

Issuance of new debt takes place in the primary market, as a means for governments, government agencies and companies to raise capital. In buying these debt instruments, investors lend money to the issuers in exchange for the promise of repayment of the loan value – or face value, or par value – at a specified future date – the maturity date. Depending on how the debt agreement is structured, the buyer may be entitled to a regular payment, referred to as the coupon.

Trade in the secondary market

Once issued in the primary market, debt can be traded in the secondary market. When debt instruments change hands, the new owners become entitled to coupon payments and the eventual repayment of the face value upon maturity. Aside from the debt issuers, participants in credit markets include wealth managers, pension funds, insurers, hedge funds, traders and retail investors.

Pricing of debt

The pricing of debt instruments is based largely on the creditworthiness of the issuing entity: if the market has doubts about the ability of a government or a business to meet its debt service and repayment obligations, it would demand a higher compensation for buying and holding the debt. 

General market sentiment, currency risk, political risk, changes in policy interest rates, regulatory changes that change the business environment, amongst other factors, would influence this assessment of creditworthiness.

Credit valuation

In credit markets, valuation is reflected in the yield on the debt instrument, which is the ratio of the annual coupon payment to the market price of the bond. Should the price of a debt instrument trade lower owing to the view that it has become riskier, the yield on the debt instrument rises (see bond spread). 

Credit market activity is a barometer of sentiment and thus of likely future economic and market trends.

Footnote: ** SIFMA estimates for 2018, measured as total outstanding debt (September 2019)
Central bank watcher: The great repression
Central bank watcher: The great repression
Monetary authorities are likely to continue repressing sovereign borrowing costs well below the nominal rate of economic growth, for years to come.
19-10-2020 | Vision
Perspectives Crédit : Les marchés ont déjà reçu leur vaccin
Perspectives Crédit : Les marchés ont déjà reçu leur vaccin
Le monde attend le vaccin qui nous permettra de retourner à la vie normale.
29-09-2020 | Vision
Investissement crédits ODD : notre manière d'aborder la durabilité dans nos portefeuilles crédits
Investissement crédits ODD : notre manière d'aborder la durabilité dans nos portefeuilles crédits
Nos recherches montrent que les entreprises qui sont alignées de manière négative sur les Objectifs de développement durable des Nations Unies (ODD) sous-performent l'ensemble de l'univers des crédits, tandis que celles qui ont un alignement positif ou neutre sur les ODD surperforment.
11-09-2020 | Product video
Logo

Décharge légale Agree

Les informations présentes sur ce site Web sont destinées exclusivement aux professionnels. Un investisseur professionnel est : un investisseur qui, à titre professionnel, dispose d'assez de connaissances et d'une expertise et d'une expérience suffisantes pour pouvoir évaluer de manière adéquate les risques financiers liés aux décisions d'investissement prises par lui-même.

Les visiteurs de ce site Web doivent être conscients du fait qu’ils sont eux-mêmes tenus de respecter toutes les lois et règlements en vigueur dans leur pays.

En cliquant sur J'accepte, vous confirmez que vous êtes un investisseur professionnel. Si vous cliquez sur Je n'accepte pas, vous êtes orienté vers la partie réservée aux particuliers.

Je n’accepte pas