MARKETS: THE MONEY MARKET
The money market is the global financial market for short-term borrowing and lending.
It provides short-term liquid funding for the global financial system. The money market is where short-term obligations such as Treasury bills and commercial paper are bought and sold.
The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend.
Participants borrow and lend for short periods of time, typically up to thirteen months. This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity.
Common money market instruments include:
- Certificate of Deposit- A time deposit at a bank with a specific maturity date; large-denomination certificates of deposits can be sold before maturity.
- Repurchase agreement (also known as a 'repo') - Short-term loans - normally for less than two weeks and frequently for one day - arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.
- Commercial Papers - an unsecured promissory note with a fixed maturity of one to 270 days; usually sold at a discount from face value.
- Treasury Bills - Short-term debt obligations of a national government that are issued to mature in 3 to 12 months.
