In fixed income, the secondary market is where outstanding debt securities are traded after their original issue date. Unlike the primary market, where new bonds are issued to raise capital, the secondary market involves existing issues changing hands among participants such as institutions, broker-dealers, and individual traders. Much of fixed-income trading is conducted over the counter (OTC) through broker-dealers rather than on a centralized exchange, though some segments use electronic platforms.
Prices in the secondary market are quoted as a price or as yield to maturity. Price movements reflect changes in prevailing interest rates, perceived credit risk, time to maturity, and liquidity. Market makers and dealers post bid and ask quotes to facilitate price discovery and transactions. The market supports liquidity by enabling holders to convert positions to cash or reallocate risk, and it helps establish current market values for outstanding issues. Settlement occurs after trade confirmation through clearing systems, typically in a few business days.
Secondary market activity affects the valuation and risk assessment of fixed-income portfolios. Investors monitor yield curves, spreads by credit quality, and liquidity conditions to understand the cost of exiting or adjusting a position. Key segments include government bonds, corporate bonds, and municipal bonds, each with distinct market structure and trading conventions.
An investor can observe the current price and yield of a previously issued corporate bond on an electronic trading platform as it trades in the secondary market.
Primary Market · Bond · Yield · Liquidity · Broker-Dealer