What Is A Bond Trade Life-cycle?

A bond is a type of fixed-income instrument issued by the government or corporations to finance its projects and operations with the help of investors. In return, when the bond matures, investors get a promised return on their investment. After the bonds are issued by the government institutes, they are traded and circulated between investors in the market. After the maturity period gets over, the investors can redeem their bonds and receive their capital with interest promised by the government bodies.
The market in which the bond is created, issued and traded is called a bond market. The bond market is basically of two types:
  • Primary Bond Market
  • Secondary Bond Market
Primary Bond Market is the place where new bonds are originated and issued. On the other hand, the secondary bond market is the one where existing bonds are traded among investors.
The life cycle of a bond consists of three steps:
  • Origination of Bond
  • Trading of Bond
  • Maturity of Bond
  • r
Let’s study them one by one:

Origination of Bonds

The origination of bonds takes place in the primary market. This is where the government institutes and corporations raise funds from investors by issuing them fixed-income security or simply a bond. The dealers act as an intermediary between the government entities and investors in the process of bond origination.


 Trading of Bonds

The trading of the bond, a type of fixed income security is processed in the secondary market. The secondary market is the location where existing bonds are traded among investors and trading takes place. Unlike equity, bonds are generally traded in a decentralized network with the help of investment banks and online trading platforms.
Maturity of bonds
Just like every fixed-income security, every bond has a maturity date. The maturity date is the date when the bond of the investor is ready to be redeemed. In case the investor needs money before the maturity period, he can use premature features of the bond to redeem his invested capital with interest earned in that period.

Refinancing of Bonds

The government bodies can also refinance the existing bonds by allotting investors the newly created bonds. Overall, investing in bonds is a safe long term investment as it is backed and regulated by the government entity. 

We at Imarticus Learning offers finance courses in capital market training which can help you understand and implement the principles of capital market trading and create wealth in the long term. 

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