Financial Instruments In The Capital Markets

An economic system is composed of individuals and businesses as well as municipalities and governments that are either borrowers or lenders and in some cases both at the same time. these economic units financial instruments that reciprocally serve a borrower and the lender simultaneously.
These financial products are municipal bonds and mortgages. While there is a greater world of financial instruments such as derivatives and high leverage profits that can be found in the best forex trading markets nothing compares to the magnitude of mortgages and municipal bonds in respect to how heavily invested these instruments are.
Municipal bonds are the long-term debt obligations on state and local governments. They are used to finance capital expenditures for things such as schools, highways and airports. The most distinguishing feature of municipal bonds is that they are coupon income is exempt from federal income taxes. As a result, individuals or companies that are in the highest income tax brackets purchase municipal bonds. Although the bonds of large municipalities have secondary markets, most municipal bonds have limited secondary markets and for this reason are not considered liquid investments.
Mortgages are long-term loans secured by real estate. They are the largest segment in the capital markets in terms of the amount outstanding. More than half of the mortgage funds go into financing family homes, with the remainder financing business property, apartments, buildings and farm construction. Mortgages by themselves do not have good secondary markets. However a large number of mortgages can be pulled together to form new securities called mortgage-backed securities otherwise known as derivatives which have or have had a very active secondary market but has come under much scrutiny and derision since the collapse of the economy in 2007. derivatives along with ill-advised forex trading tips the scales of economic balance and only confidence in municipal bonds and mortgages can change the tides.