Read sentences only with new lexis.

1. Money markets deal in short-term securities having maturities one year or less.

2. Mortgage bonds are debt that is secured by the pledge of specific property.

3. There is no uniform system for classifying the global bond markets.

4. Some sources of funds available to businesses (like issuing stock) are not available to governments.

5. A bond is an instrument in which the issuer (debtor/borrower) promises to repay to the lender/investor the amount borrowed plus interest over some specified period of time.

6. When revenues fall short expenditures governments go into debt-they borrow short- long-term funds by issuing bonds.

 

Put the missing letters.

b..nd m…ket, m..t..r..ty, de..l, short-t..m sec.r…ties, e..ty financing, sh.re, de..tor, l..nd..r, to i…..ue, under…te.

 

Work in pairs.

One student has to name all the words she/he memorised from the word list another student has to translate them.

 

Read the text.

FINANCIAL MARKETS. THE BOND MARKET. TRADING IN THE BOND MARKET

People and organizations wanting to borrow money are brought together with those having surplus funds in the financial markets.

There are a great many different financial markets, each one consisting of many institutions, dealing with different instruments in terms of the instrument maturity¹ and the assets backing it, and serving different types of customers.

Generally, financial markets are classified as money or capital markets² and primary or secondary markets.

Money markets deal in short-term securities having maturities one year or less. Capital markets deal in long-term securities having maturities greater than one year. An investor who purchases new securities is participating in a primary financial market. An investor who resells existing securities is participating in a secondary financial market.

So, when businesses, units of government or individuals cannot satisfy their needs for funds by revenue from sales of goods and services, they can turn to either debt financing (any process by which the firm gets cash or some other assets in return for a promise to pay an agreed upon sum plus interest) or equity financing (any process by which a firm raises funds in return for a share in its ownership management).

Some sources of funds available to businesses (like issuing stock) are not available to governments. When revenues fall short expenditures³ governments go into debt⁴-they borrow short-long-term funds by issuing bonds.

A bond is an instrument in which the issuer (debtor/borrower) promises to repay to the lender/investor the amount borrowed plus interest over some specified period of time. It should be stressed that one of the most important characteristics of a bond is the nature of its issuer⁵. Issuers include federal (central) governments and their agencies, supranational⁶ (such as the World Bank, the Asian Development Bank), municipal governments, and nonfinancial and financial corporations.

By far⁷ the largest issuers are central governments.

There is no uniform system for classifying the global bond markets. Quite a number of financiers consider it appropriate to use the following classification. From the perspective of a given country, the global bond market can be classified into two markets: an internal bond market and an external bond market. The internal bond market is also called the national bond market. It can be decomposed⁸ into two parts: the domestic bond market and the foreign bond market.

The domestic bond market is where issuers domiciled⁹ in the country issue bonds and where those bonds are subsequently traded. The foreign bond market of a country is where bonds of issuers not domiciled in the country are issued and traded.

Bonds traded in the US foreign bond market are nicknamed¹⁰ Yankee bonds. In Japan, foreign bonds issued by non-Japanese entities are nicknamed Samurai bonds. Foreign bonds in the United Kingdom are nicknamed bulldog bonds, in the Netherlands-Rembrandt bonds and in Spain - matador bonds.

The external bond market, also called the international bond market, includes bonds with several distinguishing features: 1) they are underwritten by an international syndicate, 2) at issue they are offered simultaneously to investors in a number of countries, 3) they are issued outside the jurisdiction of any single country, and 4) they are in unregistered form. The external bond market is commonly referred to as the offshore bond market, or more popularly, the Eurobond Market. The Eurobond Market is divided into different submarkets¹¹ depending on the currency in which the issue is denominated.

Computerization in bond markets has reduced costs of trading bonds and made them more convenient to hold and transfer: they are not issued in certificate form - they are only computer entries.

Words you need:

in terms of the instrument maturity¹ - з точки зору терміну погашення фінансового інструменту

capital markets² - ринок довгострокового позичкового капіталу

When revenues fall short expenditures³ - Коли прибутки менше ніж витрати

governments go into debt⁴- уряди здійснюють запозичення

issuer⁵ - емітент(особа, яка випускає облігації) цінних паперів

supranational⁶ - наднаціональна організація

By far⁷ - значною мірою

decompose⁸ - розкладати на складові частини

domiciled⁹ - який постійно проживає

submarkets¹¹ - субринок

Exercises

Answer the questions.

1. What role do financial markets play?

2. In what ways do financial markets differ?

3. How can financial markets be classified?

4. In what way can capital be raised?

5. What ways of raising capital are available for governments?

6. What is a bond?

7. How can the global bond market be subdivided?

8. In what forms can government bonds be issued?

2. Find in the text English equivalents for the following Ukrainian phrases:

Мати справу з різними фінансовими інструментами; обслуговувати клієнтів; з терміном виплати менше одного року; брати участь в угодах на ринку; первинний(вторинний) фінансовий ринок; звертатися до; фінансування шляхом отримування позики; мобілізація капіталу за допомогою випуску акцій; випускати облігації; обговорений строк; емітент; єдина система класифікації; внутрішній ринок облігацій; емітент, який не проживає постійно у країні; облігації, якими торгують на ринку; випуск облігацій гарантовано міжнародним синдикатом; випускати у незареєстрованій формі; офшорний ринок облігацій; скоротити затрати, які пов’язані з купівлею та продажем облігацій; випускати облігації у формі сертифікату; випускати облігації у формі запису у комп’ютері.

 

3. Think of the verbs that are commonly used with:

Maturity, bond, stock, issue, investor, banks, return, depository, sale, credit, credit rating, placement.

 

4. Think of the nouns that are most often used with:

To raise, to sell, to issue, to borrow, to trade, to divide, to float, to create, to participate, to develop, to attract, to negotiate, to mature, to place, to generate.