What are capital markets primarily used for?

Capital markets are primarily utilized for buying and selling long-term securities. This includes equity (such as stocks) and debt instruments (like bonds) that have longer maturities. The main purpose of capital markets is to provide companies, governments, and other entities with access to long-term financing that can be used for various purposes, such as expanding operations, investing in new projects, or refinancing existing debts.

In capital markets, investors are able to purchase and trade these long-term securities, which helps ensure liquidity and price discovery. This mechanism enables entities to raise funds from a diverse range of investors, thereby promoting economic growth and development. The functioning of capital markets is crucial, as it determines the costs of capital and influences investment decisions throughout the economy.