Skuldabréfamarkaður

The skuldabréfamarkaður, or bond market, is a financial market where participants can issue new debt, or buy and sell existing debt. Debt instruments, known as bonds, are essentially loans made by investors to borrowers, which can be governments or corporations. The bond market plays a crucial role in the economy by providing a mechanism for entities to raise capital for various purposes, such as funding infrastructure projects, corporate expansion, or government deficits.

Investors purchase bonds with the expectation of receiving regular interest payments, known as coupon payments, and the return of the principal amount on the maturity date. The price of bonds in the secondary market fluctuates based on factors like interest rate changes, creditworthiness of the issuer, and overall economic conditions. A higher perceived risk of default by the issuer generally leads to a higher required yield, thus a lower bond price, and vice versa.

The skuldabréfamarkaður is broadly divided into two main segments: the primary market, where newly issued bonds are sold to investors, and the secondary market, where previously issued bonds are traded between investors. This market facilitates liquidity for bondholders and allows for price discovery of debt instruments. Central banks often monitor and intervene in the bond market as part of their monetary policy operations.