Debt security

A debt security, or debt instrument, is a financial security that represents a claim on a specified future stream of income. It basically is an IOU. Examples of debt securities are bonds and money market securities.

Debt securities are issued (sold) by corporations and governments (national, state and local) in the primary debt market. Debt securities are traded by individuals and institutions in the secondary debt market.

Debt securities with maturities of less than one year are bought and sold in the money market, and are referred to as money market securities. Longer-term debt securities are bought and sold in the capital market, and are referred to as capital market debt securities or capital market fixed-income securities.

Some authors use the term "fixed-income security" (or simply "fixed income") as synonymous with "debt security". According to this classification fixed income includes money market securities as well as bonds.

Other authors use the term "fixed income" only in reference to bonds and other capital market debt securities. According to this classification money market securities and fixed-income securities are distinct types of debt securities.

There seems to be consistency in the use of the term debt security to include all debt instruments, both short and long term. Due to inconsistency in usage, whether or not fixed income includes money market securities must be inferred from the context.

For more details on debt securities, see Bond basics and Money Markets.