This is why we define the money mar

This is why we define the money market as comprising the entire short-term debt market. Another strong
reason is that short-term interest rates are not primarily “discovered” in the short-term marketable debt
market; rather they are discovered in the non-marketable debt market (starting with the repo rate, which
then influences the interbank rate, then the bank call rates and so on…), and marketable short-term
debt rates then take their cues from these rates. It will be evident that the short end of the yield curve
is established in the money market.
1.5 Essence of the bond market
1.5.1 Introduction
The long-term debt market is an extension of the money market. The bond market is a part of the longterm
debt market: it is the market for marketable long-term debt; i.e. debt that is issued in the form of
tradable securities. Few borrowers are able to access this market, mainly because of the demands of the
lenders in terms of credit risk, marketability, etc. (this will become clearer as we progress this discussion).
Formally, we define the bond market as:
The bond market is the mechanism / conventions that exist for the issue of, investing in, and the trading
of instruments that represent the long-term undertakings (usually of a fixed capital nature) of the issuers.
If this definition is dissected, we arrive at the following key words:
• Bonds.
• Market mechanism.
• Issue (primary market).
• Investing.
• Trading (secondary market).
• Long-term undertakings of a fixed capital nature.
Each of these key words will be explained briefly