The
money market instruments are amongst the safest forms of investment in the United States because the principals of these forms of investment are assured. The money market instruments are normally provided in the minimum denomination of $1 million.
The term periods of the money market instruments could vary from a single day to a year itself. However the most commonly observed term periods are three months or less. The money market instruments are often sold in active secondary markets before they mature.
Banker's Acceptance
The Banker's Acceptance is a form of money market instrument. It is basically a draft provided by a bank that could be used as a form of payment just like a cashier's check for example.
Certificate of Deposit
These are time deposits, in banks, that have a fixed date of maturity. The certificates of deposit that have comparatively bigger denominations are eligible to be sold off prior to maturity.
Repurchase Agreements
The Repurchase Agreements are primarily subscribed by government securities and are essentially short-term notes. These have term periods not exceeding two weeks. Quite often the holder of securities sells them to investors after which they agree on either a specified rate or date at which the securities may be bought back.
Commercial Paper
The Commercial Papers are promissory notes that are not secured. The term periods of these money market instruments are normally ranging from a day to 270 days. Under normal circumstances the commercial papers are sold at less than face value.
Eurodollar Deposit
The Eurodollar Deposits are made in the currency of the United States in the banks or branches of the banks that are operating outside the United States.
Federal Agency Short Term Securities
The Federal Agency Short Term Securities are available in the United States, where the following governmental agencies are responsible for bringing them out:
- Farm Credit System
- Federal National Mortgage Association
- Federal Home Loan Banks
Federal Funds
The banks and other depository agencies of the Federal Reserve are responsible for holding the Federal Funds in the United States. The Federal Funds are essentially deposits that have certain rates of interest. These funds are traded by agencies for a single day and are instant with regard to availability.
Municipal Funds
The Municipal Funds are basically notes with short-term periods and are brought out by the municipalities. They are issued as forms of tax receipts and other forms of other revenues.
Treasury Bills
The Treasury Bills are available in the United States and Canada. They are issued by the national governments in these countries. These are primarily debt obligations with short-term periods of 3 to 12 months.
Money Market Mutual Funds
The Money Market Mutual Funds are grouped money market instruments that have shorter-term periods and better quality. These could be utilized to buy securities from the money market in place of the retail and institutional investors.
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