The bond market is the great innovation that distinguishes western capitalism from previous economic systems.

Bonds issued by Renaissance Italian city states, such as the prestanze of Florence or the Venetian prestiti, proved to be financial innovations of the first order, in that they created debt securities that had the same status as traditional fixed property. In time they came to be called ‘mobile property’ (as in the later French innovation of credit mobilier).

The initial issuer had to have the power to compel uptake of the bond issue (as in the first cases, where the bonds were a form of tax) or the sovereign status to inspire confidence that an assurance of paying fixed interest for a period of years would be guaranteed.

Eventually the bond market expanded to accommodate issues from private firms (debentures) backed by the reputation and market strength of leading merchant banks (like Barings in London, or Goldman Sachs in New York) which acted as their underwriters.