Terms in this set (12)
Money market securities
Debt securities with a maturity of one year or less. Issued in the primary market through a telecommunications network
Popular types of money market securities
Negotiable Certificates of Deposit
When the US Gov. needs to borrow funds, the treasury issues short-terms securities with 4-week, 13-week and 26-week maturities on a weekly basis.
Cash management bills
Treasury bills with terms shorter than four weeks.
Pricing of Treasury Bills
The par value is $1,000 and multiples of $1,000. Since t-bills do not pay interest, they are sold at a discount from par value
Short term debt instrument issued only by well known, credit worthy firms that is typically unsecured. Normally issued to provide liquidity or to finance a firm's investment in inventory and accounts receivable. Maturities typically up to nine months. Very limited secondary market.
Similar to commercial paper, but from banks; $100k and up; vibrant secondary market.
Repurchase Agreement (repo)
One party sells securities to another with an agreement to repurchase the securities at a specified date and price.
the purchase of securities by one party from another with an agreement to sell them.
Enables depository institutions to lend or borrow short term funds from each other at the "fed funds rate".
Rate is influenced by the supply of and demand for funds in the fed funds market.
IOU backed by a reputable bank. Indicates that a bank accepts responsibility for future payment Commonly used for international trade transactions.
Dollar deposits in Europe in non-U.S. banks with the purpose of higher yield.
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