How Are Most Bonds Traded In The Secondary Market?


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Vikash Swaroop Profile
Vikash Swaroop answered
Most of the bonds are traded on the over-the-counter market when they are traded in the secondary market. And when the transaction happens the person who owns the bond pays the sales concession while selling the bond and buyers also pays concession.

But the same thing doesn't happen while issuing a new bond, the purchaser doesn't pay concession for the transaction, instead the issuing authority pay the concession to the brokers that are responsible for distributing the offerings on the behalf of the authorities.

The reason for the authorities to issue the bonds is to raise money from the people and they pay either fixed or floating interest rate that is known as coupon. The fall and rise of the interest rates guides the market to raise or reduce the price of the bonds in the secondary market.

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