1. Money Market: Introduction
  2. Money Market: What Is It?
  3. Money Market: Treasury Bills (T-Bills)
  4. Money Market: Certificate Of Deposit (CD)
  5. Money Market: Commercial Paper
  6. Money Market: Banker's Acceptance
  7. Money Market: Eurodollars
  8. Money Market: Repos
  9. Money Market: Conclusion

Money market securities are short-term IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extremely safe. Defaults on money market instruments have been extremely rare. Because of this relative safety, money market securities offer significantly lower returns than most other securities.

There is no formal money market, rather it is an informal network of banks, brokers, dealer and financial institutions that are linked electronically.

One of the most important functions of the money market is providing an outlet for large companies with temporary excess cash to invest that cash in short-term money market instruments.

Corporations with short-term cash needs can sell securities such as commercial paper, or borrow funds on a short-term basis.

Larger corporations will generally participate directly via their dealer, while smaller companies with excess cash might just park it in a money market mutual fund, a professionally managed fund that invests in various money market instruments. The best way for individual investors to access the money market is also via a money market mutual fund, or a money market account with a bank. These funds pool together the assets of thousands of investors in order to buy the money market securities on their behalf. However, some money market instruments, like Treasury bills, may be purchased directly from the Treasury.

Money market funds seek to maintain a stable $1 net asset value while paying a yield. Although these funds have traditionally held their price at $1 per share, some recent regulations allow certain funds to “break the buck” when needed.

Other than T-Bills, money market instruments are not riskless, but the risks are low. There have been defaults over the years, but they are not common.


Money Market: Treasury Bills (T-Bills)
Related Articles
  1. Investing

    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.
  2. Retirement

    Introduction To Retirement Money Market Accounts

    Money market funds are used in retirement plans and accounts because they are liquid, stable and pay competitive rates of interest.
  3. Investing

    The Money Market

    The money market provides a relatively stable place to park capital that may be needed within a short time horizon.
  4. Financial Advisor

    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.
  5. Investing

    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.
  6. Investing

    Introduction To Money Market Mutual Funds

    Learn about the easiest way to benefit from money market securities.
  7. Financial Advisor

    What to Tell Clients About New Money Market Rules

    New money market rules will have little impact on clients. Here's what to tell them if they ask.
  8. Investing

    Why Money Market Funds Break The Buck

    These funds are noted for their safety in a rough market. Read on to find out why.
Frequently Asked Questions
  1. How does the number of credit card accounts I have affect my credit score?

    Your credit score, which is also referred to as your FICO score, is a measure that creditors use to assess your potential ...
  2. What is the 'three-legged stool'?

    The "three-legged stool" was a retirement terminology from the past that many financial planners used to describe the three ...
  3. If I am looking to get an investment banking job, what education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The ...
  4. Is a Simplified Employee Pension (SEP) IRA tax deductible?

    Learn everything you need to know about your SEP IRA, including the benefits to employers and whether or not a SEP IRA is ...
Trading Center