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People and organisations 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 maturity' and the assets backing it, and serving different types of customers.

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

Money markets deal in short-term securities having maturities of 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 and management).

Some sources of funds available to businesses (like issuing stock) are not available to governments. When revenues fall short of expenditures2 governments go into debt3 – they borrow short- and 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 issuer. Issuers include federal (central) governments and their agencies, supranational (such as the World Bank, the Asian Development Bank), municipal governments, and nonfmancial and financial corporations.

By far 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 decomposed into two parts: the domestic bond market and the foreign bond market.

The domestic bond market is where issuers domiciled 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 nicknamed 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 submarkets 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.



Foreigner: Financial markets are generally classified as money or capital markets and primary or secondary markets. Do you follow this classification?

Russian: Yes, we do. But structurally we divide our financial market into a hard-currency market, a bank credit market, debt and equity markets and the market of gold and precious metals.

F.: I see. My experience in Russia tells me that your investors prefer operations in the hard currency market to investing in the real sector of your economy.

R.: Yes, our capital markets are thin, weak and vulnerable.

F.: It's a pity, because the debt market, for one, is a powerful instrument of monetary policy. Many governments issue bonds to solve their financial problems and to cover budget deficits.

R.: And how is the international bond market performing this year?

F.: Volumes of issuance have been rather high, though fewer bonds have appeared from emerging markets of Eastern Europe.

R.: Investors are still viewing borrowers in emerging markets too risky, I suppose. Western sovereign borrowers are the main players in the market, aren't they?

F.: Well, yes, but many are trying to slow down their borrowing and reduce their national debt.

R.: This leaves room for other borrowers, right?

F.: Yes, supranational have diversified tremendously, both in their products and markets. Corporate borrowers are also very active.

R.: But after the crisis investors have become more cautious, haven't they?

F.: That's right. Credit ratings of borrowers have become much more important. Investors demand transparency and liquidity. Borrowers are finding it much harder and more expensive to raise sufficient funds on the international debt market.

R.: How has the introduction of the Euro affected the bond market?

F.: Some are thinking of Euro-denominated bond issues as the bond markets are moving away from the dollar in favour of the Euro. The competition is becoming keener.

R.: We are entering a new and turbulent phase in the debt markets. Many people believe that the worst is yet to come.


1 in terms of the instrument maturity –сточки зрения сроковпогашения финансового инструмента

2When revenues fall short of expenditures –Когда доходы меньше расходов

3 ... governments go into debt –правительства осуществляют заимствования


A. financial market финансовый рынок

bond marketрынок облигаций

maturity n срок долгового обязательства

backv гарантировать, давать поручительство

to serve customers обслуживать заказчиков

money market денежный рынок, рынок краткосрочного капитала

capital marketрынок долгосрочного ссудного капитала

primary marketпервичный рынок

secondary marketвторичный рынок

deal (in)v торговать

short-term securitiesкраткосрочные ценные бумаги

turn (to)v обращаться (к кому-л.)

debt financingфинансирование путем получения займов

in return forв обмен на

equity financingмобилизация капитала с помощью выпуска акций

share (зд.) доля

ownership n (зд.) владение собственностью

to issue stock (bonds)выпускать акции (облигации)

long-term fundsдолгосрочные средства

issuer n эмитент ценных бумаг

debtor n должник, дебитор

lendern кредитор

supranational n наднациональная организация

municipal governmentмуниципалитет

by far(зд.) в значительной степени

uniform adj единый

from the perspective ofс точки зрения

internal bond marketвнутренний рынок облигаций

external bond marketвнешний рынок облигаций

decompose v разлагать на составные части

domiciled adj постоянно проживающий

subsequently adv впоследствии, затем, позже

tradev (зд.) осуществлять сделки на рынке ценных бумаг

nickname v давать прозвище

distinguishing featureотличительная черта

underwrite v гарантировать размещение ценных бумаг

jurisdiction n юрисдикция

in unregistered formнезарегистрированный

offshore bond marketофшорный рынок облигаций

Eurobond Marketрынок еврооблигаций

submarket n субрынок

denominate v выражать в валюте различного достоинства

readily adv быстро, легко, без труда

in certificate formв форме сертификата

computer entryзапись в компьютере

В. structurally adv структурно

hard-currency marketрынок твердой валюты

bank credit marketрынок банковских кредитов

debt marketрынок ссудного капитала

equity marketрынок акций

market of gold and precious metals рынок золота и драгоценных металлов

real sectorреальный сектор

thinadj (зд.) узкий

issuance n выпуск (акции)

emerging marketsмолодые, развивающиеся рынки

sovereign borrowerсуверенный заемщик, государство-заемщик

cautions adj осторожный

credit ratingкредитный рейтинг

Euro евро (валюта)

turbulent adj бурный, неспокойный


Ex. 1. Answer these questions:


A. 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 ways 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?

B. 1. What are the components of the Russian financial market?

2. Are volumes of issuance big in the market?

3. Who are the main players in the bond market?

4. What tendencies have been registered in the market lately?

5. How will the introduction of the Euro affect the market?

Ex. 2. Give derivaties of:


different adj serve v purchase v participate v

existing adj satisfy v need n important adj

measure n classification n trade n depend v

experience n dominant adj reliable adj doubt n

divide v refer v

Ex. 3. Find English equivalents for the following Russian phrases from the main text and dialogue:


A. иметь дело с различными финансовыми инструментами; обслуживать клиентов; со сроком платежа менее (более) одного года; участвовать в сделках на рынке; первичный (вторичный) финансовый рынок; обращаться (к); финансирование путем получения займов; мобилизация капитала с помощью выпуска акций; выпускать облигации; оговоренный срок; эмитент; единая система классификации; внутренний (внешний) рынок облигаций; эмитент, не проживающий постоянно в стране; облигации, которыми торгуют на рынке; выпуск облигаций гарантирован международным синдикатом; выпускать в незарегистрированной форме; офшорный рынок облигаций; сократить расходы, связанные с куплей и продажей облигаций; выпускать облигации в форме сертификата; выпускать облигации в виде записи в компьютере;

B. объем выпуска облигаций; молодые, развивающиеся рынки; снижать заимствования и сокращать национальный долг; диверсифицировать деятельность; рейтинг кредитоспособности; введение валюты евро; выпуски облигаций в евро; самое трудное еще впереди.

Ex. 4. Say in a few words what the main text is about. Use the opening phrases from Ex. 4 (Unit 1).

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