Money Market


DEFINITION of 'Money Market'

A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).


Loading the player...

BREAKING DOWN 'Money Market'

The money market is used by a wide array of participants, from a company raising money by selling commercial paper into the market to an investor purchasing CDs as a safe place to park money in the short term. The money market is typically seen as a safe place to put money due the highly liquid nature of the securities and short maturities, but there are risks in the market that any investor needs to be aware of including the risk of default on securities such as commercial paper.

The money market is different from the capital market. The differences can be read in the article Financial Markets: Capital Vs. Money Market and Getting to Know the Money Market.

  1. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
  2. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  3. Money Market Fund

    An investment fund that holds the objective to earn interest ...
  4. Money Market Yield

    The interest rate earned by investing in securities with high ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, ...
  6. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
Related Articles
  1. Mutual Funds & ETFs

    Picking the Right ETFs for Your 529 Plan

    Learn about the characteristics of ETFs that make them appropriate for a 529 portfolio, and discover how 529s should turn more conservative as college nears.
  2. Bonds & Fixed Income

    Introduction To Commercial Paper

    Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return on their money.
  3. Investing Basics

    Banker's Acceptance 101

    A banker's acceptance, a common way of financing international trade activity, provides a relatively safe, short-term vehicle for investors. An acceptance is a negotiable time draft that a bank ...
  4. 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.
  5. Investing

    Money Market

    Learn more about this segment of the financial market and how it can cater to your short-term investment needs.
  6. 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.
  7. Options & Futures

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  8. Options & Futures

    Do Money-Market Funds Pay?

    This investment provides security, but its returns may not be adequate for long-term investors.
  9. Forex Education

    The International Money Market

    Banks, corporations, traders and speculators all use the IMM to borrow, lend, trade, profit, finance, speculate and hedge risks.
  10. Bonds & Fixed Income

    The Money Market: A Look Back

    Learn how past inflationary periods can predict future real rates of return for cash investments.
  1. Do 401(k) savings earn interest?

    While there is a wide array of investment accounts available to investors, one of the most common for employees is the 4 ... Read Full Answer >>
  2. What does a sample plan using the 4% retirement rule look like?

    The 4% retirement rule is often used by financial planners to set the amount that a retiree can withdraw annually from an ... Read Full Answer >>
  3. What economic indicators are important to monitor when investing in the insurance ...

    Inflation and interest rates are the best economic indicators to monitor when investing in the insurance sector. Unlike with ... Read Full Answer >>
  4. Are money market accounts for short-term investments a good idea?

    Money market accounts are a good idea for short-term investments. Some of the desired traits in short-term investments are ... Read Full Answer >>
  5. What are some examples of securities that can be found in a money market fund?

    Some examples of securities found in money market funds are Treasury bills (T-bills), commercial paper, bankers acceptances, ... Read Full Answer >>
  6. What are the maximum Social Security disability benefits?

    The average Social Security disability benefit amount for a recipient of Social Security Disability Insurance (SSDI) in 2 ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center