Money Market: Eurodollars
  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: Eurodollars

Contrary to the name, eurodollars have very little to do with the euro or European countries. Eurodollars are U.S.-dollar denominated deposits at banks outside of the United States. This market evolved in Europe (specifically London), hence the name, but eurodollars can be held anywhere outside the United States.

The eurodollar market is relatively free of regulation; therefore, banks can operate on narrower margins than their counterparts in the United States. As a result, the eurodollar market has expanded largely as a way of circumventing regulatory costs.

The average eurodollar deposit is very large (in the millions) and has a maturity of less than six months. A variation on the eurodollar time deposit is the eurodollar certificate of deposit. A eurodollar CD is basically the same as a domestic CD, except that it's the liability of a non-U.S. bank. Because eurodollar CDs are typically less liquid, they tend to offer higher yields.

The eurodollar market is obviously out of reach for all but the largest institutions. The only way for individuals to invest in this market is indirectly through a money market fund.

Money Market: Repos

  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
RELATED TERMS
  1. Eurodollar

    U.S.-dollar denominated deposits at foreign banks or foreign ...
  2. Eurodollar Bond

    A U.S.-dollar denominated bond issued by an overseas company ...
  3. Ted Spread

    The price difference between three-month futures contracts for ...
  4. Euro Feds

    A federal wire transmission advancing funds in Eurodollars from ...
  5. Repatriation

    The process of converting a foreign currency into the currency ...
  6. Either-Way Market

    A condition that exists in the eurodollar interbank deposit market ...
RELATED FAQS
  1. Are eurodollars related to the currency called the euro?

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  2. What are the typical durations for a certificate of deposit?

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  3. How safe an investment is a certificate of deposit?

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  4. What is considered a good interest rate for a certificate of deposit (CD)?

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  5. How are yields taxed on a certificate of deposit (CD)?

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  6. What is the difference between a demand deposit and a term deposit?

    Understand the meaning of demand deposits and term deposits, and learn about the major differences between these two types ... Read Answer >>

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