What is the Credit Market?

The credit market is a financial market allows people to purchase and sell debt instruments such as bonds. Here are the basics of the credit market and how it works.

The Credit Market

The credit market is also sometimes referred to as the bond market, debt market or fixed income market. Regardless of which term you use, you are basically referring to the place where bonds are bought or sold.

Bonds

Many different corporations issue corporate bonds to individual investors. When you purchase a corporate bond, you are essentially loaning money to this company for a specific period of time. Depending on the credit rating of the issuing company, you will be able to earn a certain amount of interest. If the credit rating of the company is poor, you will be able to earn a higher amount of interest than you would with a bond from a strong company. However, you need to keep in mind that companies with poor credit ratings represent a higher amount of risk of default.

Investing

Investing in the credit market can be beneficial to many different types of investors. This type of investment provides you with regular interest payments over the life of the bond. This gives you a way to create a regular source of income over the long-term.

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