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
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.