At the end of this session you should be able to:
- identify the primary components of interest rates: the real rate, the inflation premium and the risk premium
- understand the economic factors which may cause these components to change
Participants in the fixed income market
In order to get a better understanding of the financial market environment, it is useful to look briefly at the market’s participants.
Fundamentally the market can be divided into two core components, namely borrowers and lenders.
The main borrowers in the market are governments, banks, other financial institutions and corporations. The main investors in the market are banks, fund managers, insurance companies, foreign investors, managed funds, self managed superannuation funds, high net worth individuals and retail investors.
Intermediaries such as the banks, brokers and dealers play an important role in the market by putting these investors and borrowers together.