Investment Securities - Treasury Bills
Money market securities issued by the
- Treasury bills (T-bills)
- Treasury and agency securities with remaining maturities of less than a year
- Federal National Mortgage Association (Fannie Mae) short-term discount notes
- Federal Home Loan Bank short-term discount notes and interest-bearing notes
- Federal Farm Credit Bank notes and bonds maturing in one year
- Short-term discount notes issued by other smaller agencies
We will discuss U.S. Government and Federal Agency Instruments further in a later section.
Municipal Government Instruments
Municipalities issue tax-exempt money market securities that include the following notes:
A short-term obligation in the form of a note, used for the funding of construction projects such as housing developments. In most cases, the note issuers will repay the note obligation by issuing a longer term bond and using the proceeds from the bond to pay back the note.
- This type of financing is most often seen at the municipal level: for example, a large city might use a construction loan note to finance a large housing project to meet the demands of its growing population.
- A short-term debt security issued on the premise that future revenues will be sufficient to meet repayment obligations.
- RANs are generally used to generate immediate investment capital to begin a large project. These securities are repaid with future expected revenues from the completed project, which may come from sources like turnpike tolls or stadium ticket sales.
- A short-term interest-bearing security issued in the anticipation of larger future bond issues.
- Bond anticipation notes are smaller short-term bonds issued by governments and corporations. Knowing that the proceeds of the larger future issue will cover the anticipation notes, the issuing bodies use the notes as short-term financing.
- Short-term debt securities issued in anticipation of future tax collections.
- TANs are generally issued by state and municipal governments to provide immediate funding for a capital expenditure, such as highway construction.