Money Markets - The "call money market" and the general interbank market deal with wholesale borrowing and lending amongst banks and financial institutions.
The money market allows institutions and government to manage their short-term cash needs.
Trading in money markets is done Over The Counter ??
One Year or Less
includes all types of instruments
Money Market Instruments include transactions for the following:
treasury bills, local authority, public utility bills, certificates of deposit, commercial paper, bills of exchange
These are short-term transactions up to a year in duration.
Most of these instruments are sold at a discount and the market refers to the "discount rate" and the resulting "yield". The instruments traded are below:
|LIBOR||this is unsecured. 3M Libor is the most referenced rate|
|Bill of Exchange|
|Certificate of Deposit|
|Repurchase Agreement||this is secured against an asset LIBOR - this is unsecured|
|Bankers Acceptances (BAs)||bank loans that are sold to investors|
|Floating Rate Notes (FRNs)||these are corporate notes that pay an interest rate that "floats" in response to changing market interest rates|
|Adjustable Rate Preferred Stocks (ARPs)||these are similar to FRNs although the rate of interest is usually tied to the highest of the three following rates: 90 Treasury bill, 10 year Treasury note, 20 year Treasury bond|
|Money Market Preferreds (MMPs)|
|Negotable Certificates of Deposit|
Domestic Money Markets
Domestic markets are for transactions that are in the local currency and under the control of the local central bank
Call Money - There is a market in money which is borrowed/lent for a very short period of time. Bankers talk of "call money" and the "call money market". Money is lent by one bank to another and may be called back at any time.
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