Economy & Finance 101: The bond market

Hello everyone this is sebastian mcmahon from ia financial group and here’s another economy finance 101 video this time on the bond market so a few videos ago we covered bonds so what is a bond the type of bonds but here let’s look at the whole market so a few definitions to start the bond market what that is it’s uh the the debt market the fixed income market or

The credit market so those are all uh synonyms or names for the bond market and this is the collective name given to all transactions and issuances of debt security so the total value of of debt that has been written uh in the world that has exchanged hands uh constitutes the bond market so contrary to the stock market there is no bond exchange per se there are some

Some things some platforms electronic platforms that exist that are very marginal but generally it’s over the counter that these things are traded so it’s really phone calls and i mean you have to find someone to buy or to sell the paper that you’re looking for you’re looking to to to sell and a bond index so similarly as the stock index so this is uh the pers this

Is a basket of securities of debt securities classified according to certain criteria like geography so you can have canadian bond or canadian bond index or us bond index maturity so short term bonds meaning bonds that will be maturing soon in the next months next quarters next years or long bonds those that will be measuring in decades or the type of issuers or

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Government or corporation so a few definitions to start now looking at the bond market as a whole so you’ll be might be surprised to learn that the bond market is bigger than the stock market so data here coming dating from 2020 but showing that the uh the stock market has a total value of about 94 trillion us dollars so 94 000 billion dollars but the bond market

Which has been around for thousands of years compared to stocks which have been around just for a few hundred well the total value of the market is 128 trillion us dollars so 128 thousand billion us dollars so that’s much bigger than the stock market so now what does this stuck that the bond market still look like well if you hear also a few definitions so it’s

Mostly governments and here it says ssa so supernatural supranational and sovereign products so those debts from governments uh federal governments proven shock or miss municipal governments go into the ssc category and in the great part it’s a corporate bond so a debt that has been emitted by by companies so this is the breakdown of the bond market so looking at

The size of all of the markets out there so the ssa market if you look at geography you said about a quarter is in the us a quarter is in china but it’s still pretty well diversified the other category the green part on the left-hand part chart on the screen here is a rather large and when you look at the corporate bond market it’s even more diversified so us and

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China still very important but it’s uh spread wildly across the globe so looking at bond indices now so by no means is this an exhaustive list it’s just what we typically look at and what we tend to base our strategies on so we if we want to invest globally so the two go to indices that we would use would be the bloomberg global aggregate index which is very broad

And covers um the whole world or we could use the em usd aggregate index from bloomberg so that from emerging uh countries that is labeled in us dollar if he were to invest in uh us bonds we could use indian this is the bloomberg us treasuries for government that corporate for high quality corporate corporate debt or the us corporate high yield index so that’s a

Higher higher yielding so less quality uh corporate debt in canada the usual suspects are the ftse a canada indices so you have the long you have the universe you have the long and you have the corp index so these would be the ones that you see quoted in financial news uh generally and if you were to invest in europe in asia well bloomberg euro aggregate or the

Bloomberg asian pacific aggregate would be two in this is that we would be looking at so again this is just to give you an idea of the indices that we’ll look at when we make analysis when we make investment decisions it’s not limited to those but those would be uh the indices that we spend the most time looking at so there you go that was in a nutshell a picture

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Of the bond market so i hope it was helpful and i’ll be back again in another economy finance 101 video

Transcribed from video
Economy & Finance 101 : The bond market By iA Groupe financier – iA Financial Group