Identification

• Credit market securities are generally identified with bonds. Further, certificates of deposit and commercial paper are associated with the credit market. According to Forbes' Investopedia, the credit market, "dwarfs the equity market" in size.
  
  

Features

• Interest rates measure credit market risks. Investors covet higher interest rates to compensate themselves for elevated risks. Relatively high interest rates often identify junk bonds, or distressed investments. Credit rating agencies, such as Standard and Poor's, categorize debt securities according to their likelihood of making payments.
  
  

Considerations

• The Federal Reserve Board affects credit market performance by influencing interest rates. The Fed targets lower interest rates to promote economic growth, and raises rates to manage inflation. Falling interest rate environments actually improve valuations for current bonds. During these periods, newly issued debt will pay lower rates than existing securities.
  
  

Benefits

• Corporations may issue debt to access capital---without losing control. Meanwhile, creditors prefer debt investments for their relative safety. Stocks carry voting rights, but bonds have business asset claims above stocks.
  
  

Risks

• In general, debt securities pay smaller returns that are adversely affected by inflation.