MBA (General)IV – Semester, International Business Unit V
Definition of Importance of the Market
The growth of Euro-currency market has produced far reaching effects on the international financial system and the monetary scene. Firstly, these floating funds have augmented the official international liquidity and helped the financing of deficits in the balance of payments of countries. Secondly, these Euro-currency funds are found useful for private corporate investments and for working capital purposes.
Importance of the Market
The growth of
Euro-currency market has produced far reaching effects on the international financial system and the
monetary scene. Firstly, these floating funds have augmented the official international liquidity and helped the
financing of deficits in the balance
of payments of countries. Secondly, these Euro-currency funds are found useful for private corporate investments and for working capital
purposes. Thirdly, the quick and efficient source of funds provided by this market has helped the easing of pressures
on the international monetary system, particularly on
the dollar and other currencies under strain.
Fourthly, it has provided a channel for profitable investment for excess funds
of governments, central banks and business
corporations. This market has finally opened up avenues for
greater international monetary co-operation and integration.
Three major
world bond markets-those of the United States, Japan and the United Kingdom – and their most frequently traded instruments.
The US Bond Market
The US bond market
is the largest and most active in the world. It is also the one that offer the largest variety of issuers
and terms. Government issues are not the whole
market, however.
There are also substantial components of municipal bonds and mortgage bonds as well as a large and growing
sector for corporate
issues.
Government
Issues
US government
bonds are the basic element in many, if not most, international portfolios. About two-thirds of this debt
is composed of negotiable instruments with maturities of several
days up to 30 years.
Treasury Bills
Treasury bills
have maturities of up to one year. They are issued in four main forms: three-month, six-month, one-year and cash management bills with variable
maturities. They represent
about one-third of the government’s outstanding negotiable debt.
Treasury
Notes
Treasury notes
have maturities from two or ten years. They represent more than half of the negotiable debt issued by the government.
Treasury Bonds
Treasury bonds
are issued with maturities of 15, 20 and 30 years. The maturities are chosen depending
on the Treasury’s perceived financing needs.
