Credit Market

You're a...dreamer. You start to think about the Milky Way galaxy and how big it is. Then, moments later, you realize that infinite space dwarfs the size of the Milky Way.

That’s a lot like the financial markets. In this case, the stock (or equity ) market is the Milky way. And the credit markets are infinite space.

The credit market is where companies, cities, and sovereign governments go to issue bonds and other debt instruments in order to raise money. Each debt instrument typically experiences a significant amount of credit analysis, and receives a credit grade.

Credit markets experience cycles, and a lack of credit or flight to quality can be a forward-looking warning to the equity markets. Following the collapse of Lehman Brothers, the credit market experienced a sharp body blow. An ensuing credit crisis happened due to a lack of available funding in the short-term loan markets and a run on financial institutions.