The capital market, better known as the securities market deals with companies and the governments raising long-term funds. The stock market and the bond market are the integral parts of the capital market. The capital markets are divided into two parts. The primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded in.
Debentures : A debenture is a long-term debt instrument used by governments and large companies to obtain funds. It is almost the same as bonds excepting the securitization conditions. The debenture holders are considered as ordinary creditors in case of bankruptcy. Debentures are freely transferable by the debenture holder.
Bonds : A bond is simply a loan in the form of a security. The one who issues the bond is the borrower. Bonds enable the issuer to finance long-term investments with external funds. Certificates of deposit and commercial paper are considered money market instruments. Bonds are floated in the markets by different institutions, supranational institutions. The most common process of issuing bonds is through underwriting. In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors, whereas Government bonds are typically auctioned.
Government Bonds : Government bonds are issued by a government and it is denominated in the country's own currency. Sovereign bonds are bonds issued by national governments in foreign currencies.
Corporate Bonds : A corporate bond is a bond issued by a company. Company bonds are usually for long terms i.e. for a period of at least one year. Corporate bonds are often listed on major exchanges and they are usually taxable. The risk factors in this case are higher than in Government bonds. However it depends upon the particular company, the political situation in the country, the ruling government and many other external factors