Money Market
MONEY MARKETS
Good afternoon everyone, my name is Đinh Lê Ngọc Anh and today, I’m going to talk about money markets and common money market instruments.
I. DEFINITION
The money markets consist of a network of corporations, financial institutions, investors and governments, which need to borrow or invest short- term capital (up to 12 months). For example, a business or government that needs cash for a few weeks only can use the money market. So can a bank that wants to invest money that depositors could withdraw at any time. Through the money markets, borrowers can find short- term liquidity by turning assets into cash. They can also deal with irregular cash flows- in-comings and out-goings of money- more cheaply than borrowing from a commercial bank. Similarly, investors can make short- term deposits with investment companies at competitive interest rates: higher ones than they would get from a bank. Borrowers and lenders in the money markets use banks and investments such as stocks, bonds, short- term loans and debts, rather than lending money. In brief, the money market is a short term debt market that deals with different money market instruments.
III. Common money market instruments
There are several different instruments in the money market, offering different returns and different risks. In the following sections, we'll take a look at the common money market instruments.
1. Treasury Bills (T-bills) are the most marketable money market security. Their popularity is mainly due to their simplicity. Essentially, T-bills are a way for the government to raise money from the public. In this tutorial, we are referring to T-bills issued by governments.
T-bills are short-term securities that mature in one year or less from their issue date. They are issued with three-month, six-month and one-year maturities- the length of time before a bond become repayable. T- Bills in a country’s own currency are generally the safest possible investment. They are usually sold
Good afternoon everyone, my name is Đinh Lê Ngọc Anh and today, I’m going to talk about money markets and common money market instruments.
I. DEFINITION
The money markets consist of a network of corporations, financial institutions, investors and governments, which need to borrow or invest short- term capital (up to 12 months). For example, a business or government that needs cash for a few weeks only can use the money market. So can a bank that wants to invest money that depositors could withdraw at any time. Through the money markets, borrowers can find short- term liquidity by turning assets into cash. They can also deal with irregular cash flows- in-comings and out-goings of money- more cheaply than borrowing from a commercial bank. Similarly, investors can make short- term deposits with investment companies at competitive interest rates: higher ones than they would get from a bank. Borrowers and lenders in the money markets use banks and investments such as stocks, bonds, short- term loans and debts, rather than lending money. In brief, the money market is a short term debt market that deals with different money market instruments.
III. Common money market instruments
There are several different instruments in the money market, offering different returns and different risks. In the following sections, we'll take a look at the common money market instruments.
1. Treasury Bills (T-bills) are the most marketable money market security. Their popularity is mainly due to their simplicity. Essentially, T-bills are a way for the government to raise money from the public. In this tutorial, we are referring to T-bills issued by governments.
T-bills are short-term securities that mature in one year or less from their issue date. They are issued with three-month, six-month and one-year maturities- the length of time before a bond become repayable. T- Bills in a country’s own currency are generally the safest possible investment. They are usually sold