what are capital markets

Capital markets are financial markets where long-term debt or equity-backed securities are bought and sold. These markets are used to channel savings and investments between suppliers and those who seek capital for their own use. Suppliers in capital markets are typically banks and investors, while those who seek capital are businesses, governments, and individuals. Capital markets are used to sell different financial instruments, including equities and debt securities. The main entities seeking to raise long-term funds on the primary capital markets are governments and business enterprises. Governments issue only bonds, whereas companies often issue both equity and bonds. Capital markets can be either primary or secondary markets. In a primary market, new stock or bond issues are sold to investors, often via a mechanism known as underwriting. The secondary market is where existing securities are traded. Capital markets are a very important part of the financial industry, bringing together suppliers of capital and those who seek it for their use. These markets are divided into different categories, including the stock market, the bond market, and the currency and foreign exchange markets.