Capital market

Post date: Sep 7, 2011 3:38:00 AM

[Definition from The economic of money, banking, and financial markets (9th Ed) - Mishkin]

Capital market is the market in which long-term debt(generally those with original maturity of one year or greater) and equity instruments are traded.

Capital market instruments

1. Stock

2. Mortgages

Mortgages are loan to households of firms to purchase housing,land , or other real structures, where structures or land itself server as collateral for the loan.

The mortgage market is the largest debt market in USA.

3. Corporate Bonds

The long-term bonds are issued by corporations with very strong credit rating.

4 US. Government Securities

Long-term debt instrument are issued by the U.S Treasury to finance the deficits of federal government.

5. US Government Agency Securities

Long-term bonds are issued by various government agencies such as Ginnie Mae, the Federal Farm Credit Bank to finance such items as mortgages, farm loans, or power generating equipment. Many of these securities are guaranteed by the federal government

6. State and Local Government Bonds

Also called municipal bonds ,a long-term debt instrument by state and local governments to finance expenditure on schools, roads, and other large programs.

7. Consumer and Bank Commercial Loans

These loans to consumers and businesses are made principally by banks but, in the case of consumer loans ,also by finance companies.