What is the role of a bond market in the economy?

The bond market is essential to the economy because it enables governments, municipalities, and corporations to raise capital by issuing debt securities. Investors who purchase bonds lend money to the issuer in exchange for periodic interest payments and the return of the principal at maturity. Bonds provide a way for governments to finance infrastructure projects and social programs, while corporations use the bond market to fund expansion and operations. The bond market also offers investors a relatively low-risk investment option compared to stocks, providing income through interest payments and offering diversification within investment portfolios.