The initial sale of a bond by a company is known as a primary market transaction. This is when the company issues the bond for the first time and sells it directly to investors.
On the other hand, a secondary market transaction refers to the buying and selling of bonds after they have already been issued in the primary market. In the secondary market, investors trade bonds among themselves, rather than buying them directly from the company.
To illustrate this, let's say Company A issues a bond in the primary market and sells it to Investor X. Investor X then decides to sell the bond to Investor Y in the secondary market. This transaction between Investor X and Investor Y is an example of a secondary market transaction.
In summary, a secondary market transaction involves the buying and selling of bonds among investors after they have already been issued in the primary market. It allows investors to trade bonds and provides liquidity to the bond market.
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