Comparing Stock Market and Bond Market in the U.S.

Essentially, bonds atomic number 18 the long-term, public debt of an publicise entity marketed in a convenient and affordable denomination. Bonds are considered are fixed income securities because the debt service obligations of the issuer are fixed, in that the issuer agrees to pay a fixed amount of periodic interest to the bond holder and to repay a fixed amount of principal at the date of maturity (Gitman, Joehnk, & Pinches, 1995).

Another important diagnostic of bonds is the term-to-maturity, or the life of debt instrument. The short-term separate the public debt market involves instruments with maturities of cardinal year or less. The intermediate segment involves issues with maturities in overabundance of one year but less than seven-to-ten years. The long-term segment is the bonds market where the maturities of the debt instruments are in excess of seven-to-ten years (Gitman, Joehnk, & Pinches, 1995).

The term-to-maturity characteristic of bonds constantly change, however, as an instrument moves closer to its maturity date. These changes in the term-to-maturity characteristic of a bond are important because the prevalent maturity of the issue, among other factors, affects the price volatility of a debt obligation. Generally, the shorter the term-to-maturity of a bond, the less is the price volatility of the instrument (Gitman, Joehnk, & Pinches, 1995).

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