The debt market, made up of the money market and the bond market, is an important element of the financial system. The bond market is usually seen as the market for long-term marketable debt instruments (ie bonds) and the money market as the market for short-term marketable debt instruments, such as commercial paper (CP) and treasury bills (TBs).

This usual description of the money market is inadequate because this market is much more than the market for short-term marketable debt instruments. The outstanding amount of short-term marketable debt instruments is small compared with the outstanding amount of short-term non-marketable debt, such as mortgage advances, overdraft facilities utilised instalment sale agreements and so on. These are also debt instruments (the assets of banks) issued by the ultimate borrowers (as are CP and TBs). Interest rates are discovered in the broader market and not only in the marketable instruments market.

A critical element of the money market is also the two interbank markets; in fact this is where very short-term rates have their genesis. Monetary policy is played out in the interbank markets (the repo rate is implemented here) and in the marketable instrument money market (open market operations are implemented here). Monetary policy is designed to curb the growth rate in bank credit expansion and its counterpart, the money stock, and this also plays out in the money market.

The definition of the bond market on the other hand is adequate, but requires a little elucidation. We need to distinguish between the long-term debt market and the bond market. The former includes all long-term debt, marketable (such as government and corporate bonds) and non-marketable (such as mortgage finance), while the bond market includes only marketable long-term debt. The banking system accommodates all forms of long-term debt (if it is well-collateralised), but the other main investors (insurers, retirement funds and bond unit trusts) only accommodate (buy) the marketable debt of prime issuers.

The bond market can therefore be described as the mechanism / conventions that exist for the issue of, investing in, and the trading of marketable instruments that represent the long-term undertakings (usually of a fixed capital nature) of the issuers.
 

The overall objectives of the course are to:

• Expose the learner to the broad financial system as the context of the bond market.
  
• Present a description of the bond market as an extension of the money market except that the instruments are all marketable.
  
• Present the participants of the bond market that represent demand and supply.
  
• Describe the variety of instruments of the bond market.
  
• Present the organisational structure of the bond market.
  
• Describe the mathematics of the bond market.
  
• Explain the other tools of the bond market such as duration and the yield curve.
  

The intended audience is persons involved in the financial sector:

• Private sector bankers.
  
• Central bankers.
  
• Members of securities exchanges.
  
• Dealers in the financial sector.
  
• Financial market analysts.
  
• Economists.
  
• Company treasury managers and dealers.
  
• Treasury management (outsourcing) companies.
  
• Government treasury officials.
  

The expected outcomes of the course are:

• Comprehend the context of the bond market: the financial system.
  
• Understand the supply and demand factors of the bond market.
  
• Discuss the characteristics of the various instruments of the bond market.
  
• Understand the organisational structure of the bond market.
  
• Be able to execute calculations relevant to the main bond market: instruments (that reflect the principals only).
  
• Have a rudimentary understanding of the various bond market tools.

This course will comprise of the following modules:

Module 1. Bond market: context & essence
This module provides an overview of the financial system which is the contextual framework of the bond market. The skeleton of the bond market is presented which serves as an introduction to the modules that follow.

Module 2. Bond market: issuers & investors
The five groups of issuers of bonds are elucidated as well their motivations for issuing bonds. The investor groups are then covered, including their motivations for holding bonds and the risks they face in holding bonds.

Module 3. Bond market: instruments
The variety of instruments of the bond market is considerable. The most common one is the so-called plain vanilla bond (fixed-rate, fixed-term to maturity). The other more popular bonds are the zero-coupon bonds and inflation-linked bonds. In this module these and the many others are elucidated in brief.

Module 4. Bond market: organisational structure
As all markets, the bond market has a particular organisational structure. Most bond markets are quote-driven in an OTC market, dominated by the banks. Some markets are OTC and dual in terms of driver (quote- and order-driven). Some countries have bond markets that are entirely exchange-driven.

Module 5. Bond market: mathematics
The foundation of the mathematics of all financial market instruments is the time value of money, which is manifested in the present value (PV) / future value (FV) concepts. In essence the mathematics amount to the discounting of future cash flows (= FVs) to PV at the applicable yield to maturity (ytm). Ytm is a rate developed to cope with multiple cash flows in the future.

Module 6. Bond market: tools
There are numerous tools developed by bond market participants over the past few decades: alternative yield measures, number of LCC per basis point, duration and the yield curve. They are useful in risk and return considerations.

UNITAR online courses attempt to create a networked learning environment, in which participants have the flexibility to learn at their own convenience and pace but also are able to interact with peers and experts through the discussion board facility.

This online course will be conducted in the English language.
 

This course is designed as an online course in which participants will be primarily responsible for their own learning. Each lesson will consist of the following components:

1) Basic Reading Materials (Compulsory Reading Materials): these materials are intended to educate the participants about the basic concepts and principles applicable to the subject-matter of the lesson. It will include, where appropriate, sample materials. These materials will constitute the required reading materials for the lesson

2) Advanced Reading Materials (Optional Reading Materials): this will consist of optional reading materials for participants who wish to learn more about the topic than what is covered in the lesson.

3) External Links: This will refer the interested participants to additional books, articles, documents, and websites that deal with the issues raised in the lesson.

4) Glossary: A glossary of terms tailored to the online course will be provided to the participants and act as a learning support during the entire course.

5) Quizzes: At the end of each lesson there will be a set of quizzes for participants to answer. These quizzes are designed to test the participant's understanding of the lesson. Participants are required to pass each quiz and obtain at least 80% or more passing grade in order to be eligible for a certificate. All quizzes will need to be taken online.

6) Community Discussion Board: There will be a community discussion board available on which participants can post questions or comments that can be seen by the instructor and the other participants. This discussion board will be moderated by the course director and UNITAR. Structured discussion strings will be posted on a weekly basis.

All successful participants will be eligible to a certificate after completion of this online course.