This lesson examines the major financial market segments and their operations. The IBSL Diploma curriculum identifies money markets, fixed income/bond markets, and stock markets as core components of the financial system . Global curricula consistently differentiate between these market types, each serving distinct functions for borrowers and investors .

2.1 The Money Market
The money market is the market for short-term debt instruments with maturities of one year or less . It provides a mechanism for liquidity management for financial institutions, corporations, and governments . Key instruments include Treasury bills, commercial paper, repurchase agreements, and short-term bank deposits . The money market is distinct from the capital market in both the maturity of instruments and the profile of participants . Money markets are a primary channel for central bank monetary policy operations .

2.2 Fixed Income (Bond) Markets
The fixed income or bond market is the market for long-term debt securities where governments and corporations borrow funds from investors . Key participants include governments issuing sovereign bonds, corporations issuing corporate bonds, and institutional investors such as pension funds and insurance companies . Bond market indicators include the term structure of interest rates, credit spreads (the difference between corporate and government bond yields), and the level of real and nominal interest rates . Students learn to analyse yield curves and credit spreads as indicators of market sentiment and economic conditions .

2.3 Equity Markets
Equity markets are markets for ownership shares in corporations . These include primary markets where new shares are issued through initial public offerings (IPOs) and secondary markets where existing shares are traded, such as stock exchanges . Equity markets provide companies with a permanent source of capital and enable investors to participate in corporate growth . Students examine equity issuance processes, the role of market participants such as institutional investors and investment banks, and internationalisation of equity markets . The global integration of equity markets has been a defining feature of modern financial system development .