Investment Securities - Money Market Instruments

In the financial marketplace, a distinction is made between the capital markets and the money markets. The capital market is a source of intermediate-term to long-term financing in the form of equity or debt securities with maturities of more than one year. The money market provides very short-term funds to corporations, municipalities and the United States government. Money market securities are debt issues with maturities of one year or less. For more information, review our Money Market tutorial.

Characteristics
Money market instruments give businesses, financial institutions and governments a means to finance their short-term cash requirements. Three important characteristics are:

  • Liquidity - Since they are fixed-income securities with short-term maturities of a year or less, money market instruments are extremely liquid.

  • Safety - They also provide a relatively high degree of safety because their issuers have the highest credit ratings.

  • Discount Pricing- A third characteristic they have in common is that they are issued at adiscount to their face value.
Treasury Bills


Related Articles
  1. Investing Basics

    Financial Markets: Capital vs. Money Markets

    Financial instruments with high liquidity and short maturities trade in money markets. Long-term assets trade in the capital markets.
  2. Retirement

    Money Market: What Is It?

    The money market is a subsection of the fixed income market. We generally think of the term fixed income as being synonymous to bonds. In reality, a bond is just one type of fixed income security. ...
  3. Professionals

    Other Money Market Instruments

    Government Money Market Instruments The Government and many of its agencies will go to the money market to obtain short- term funds. Some of the government money market instruments include: Treasury ...
  4. Professionals

    Introduction

    The money market is a place where issuers go to obtain short-term financing. An issuer who needs funds for a short term, typically under one year, will sell short-term instruments known as money ...
  5. Options & Futures

    20 Investments: The Money Market

    What Is It? The money market deals in fixed-income securities, not unlike the bond market. The major difference is that the money market deals in short-term debt and monetary instruments. In ...
  6. Investing Basics

    Financial Markets: Capital Vs. Money Markets

    Two commonly used components of the financial market are money markets and capital markets. Find out the similarities and differences between them.
  7. Investing

    Why Cash is King When Markets are Volatile

    After the past several years, you might be addicted to equity. But when markets turn volatile, cash is the best option. Here's why.
  8. Investing News

    Money Market vs. Short-Term Bonds: A Compare and Contrast Case Study

    Discover characteristics of money market and short-term bonds, including how the investments are alike and different, and the benefits and risks each offers.
  9. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  10. Fundamental Analysis

    Understanding Short-Term Investments

    These are investments that have a maturity date of less than one year, or will be liquidated within a year.
RELATED TERMS
  1. Money Market

    A segment of the financial market in which financial instruments ...
  2. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  3. Pure Discount Instrument

    A type of security that pays no income until maturity; upon expiration, ...
  4. Marketable Securities

    Very liquid securities that can be converted into cash quickly ...
  5. Ultra-Short Bond Fund

    A type of bond fund that invests only in fixed-income instruments ...
  6. Debt Issue

    A fixed corporate or government obligation, such as a bond or ...
RELATED FAQS
  1. Are money market accounts for short-term investments a good idea?

    Learn whether money market accounts are good ideas for short-term investments. Money market accounts combine aspects of a ... Read Answer >>
  2. What's the difference between bills, notes and bonds?

    Treasury bills (T-Bills), notes and bonds are marketable securities the U.S. government sells in order to pay off maturing ... Read Answer >>
  3. What are the characteristics of a marketable security?

    Find out what it takes for a financial asset to be considered a marketable security, including its liquidity, intent of use ... Read Answer >>
  4. How do I calculate a bond's modified duration using Excel?

    Understand the benefits of investing in a money market mutual fund, and learn why investors use this type of account in volatile ... Read Answer >>
  5. Which financial instruments have par values?

    Understand the difference between short-term investments and marketable equity securities, and learn the importance of short-term ... Read Answer >>
  6. What are some examples of money market funds?

    Learn more about different types of money market mutual funds, including those that invest in government paper versus commercial ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center