The Bond Market: Everything You Need to Know

Learn about the different kinds of bonds and the pros and cons of investing in the bond market.

By Jeremy Bowman – Updated Jul 25, 2025 at 8:59 PM EST | Fact-checked by Frank Bass

Key Points

The global bond market value at $140.7 trillion exceeds the global equity market at $115 trillion.
Bonds, offering fixed income, bought/sold over-the-counter, are less volatile than stocks.
Investing in bonds: options include government, municipal, corporate, and mortgage bonds.
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You might think the stock market is huge, but the bond market is even bigger. According to the Securities Industry and Financial Markets Association (SIFMA), the global bond market was worth $140.7 trillion at the end of 2023, compared to the $115 trillion global equity market cap.

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Although some stock investors may ignore the bond market, fixed-income markets influence the stock market, since bonds compete for investment dollars with stocks and the overall economy. So it's important to understand the bond market even if you have no intention of owning bonds.

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An infographic explaining the difference between the primary and secondary bond market. — Image source: The Motley Fool.

If you are considering investing in bonds, there are a number of different options at your disposal, including corporate bonds, municipal bonds, Treasuries, mortgage bonds, and others. In this deep dive into everything about the bond market, we'll review the different kinds of bonds, how the bond market works, how it compares to the stock market, and the pros and cons of investing in the bond market.

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Bonds can be bought and sold in two different ways -- through the primary market and in the secondary market.

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Primary market

The primary market refers to new issues of bonds. This is where bonds are originated. If you are buying a bond in the primary market, you are buying it directly from the seller, which could be a company, a government, a bank, or another financial entity that may create a financial product such as a mortgage bond.

Secondary market

On the secondary markets, bonds are bought and sold between investors through a broker. In a sense, bonds on the secondary market are traded like stocks, from investor to investor rather than from the borrower or company. Although bond prices and bond yields can change over time, their coupons and maturities do not, which means bonds generally tend to be less volatile than stocks.

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Table by author.
Pros	Cons
Investors get a reliable income stream.	Unlike stocks, upside potential is limited.
Credit ratings allow investors to choose the option best suited to their risk tolerance.	The bond market isn't always liquid. Some bonds aren't that easy to sell.
Falling interest rates will lift bond prices.	If you own bonds, rising yields make them worth less.

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Bonds vs. Stocks: What's the Difference?

Investing in stocks and bonds can help to build wealth for anyone with disposable income. Read about the differences between them.

What Is a Bond Rating?

A bond's rating can say a lot about a particular security and its investment risk level.

How to Invest in Green Bonds

Green bonds finance eco-friendly projects. Learn how they work, their benefits and risks, and how to invest in them.

The bottom line

The bond market can offer valuable opportunities for investors looking for fixed income streams, and investors of any risk tolerance can find a bond that suits them, from Treasuries to junk bonds to emerging-market bonds.

It also gives corporations and governments a way of raising money. A number of companies prefer to raise money through the debt market rather than by selling new shares and diluting current shares.

In a falling interest-rate environment, bond yields will fall and prices on existing bonds will rise, which could pressure lenders. Lower yields can also encourage investors to move into the stock market, seeking yield from dividend stocks.

Because bonds offer a fixed-income stream, they are popular with retirees and other investors with shorter time horizons. Although you may not choose to invest in bonds, every investor should understand the relationship between stocks, bonds, and interest rates.

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Bond market FAQ

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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