Money market pdf that will help you understand further its definition, importance, classification, structure and examples. There are a lot of examples here and it is for everyone that needs to know about money market.
Money market pdf that will help you understand further its definition, importance, classification, structure and examples. There are a lot of examples here and it is for everyone that needs to know about money market.
Money market pdf that will help you understand further its definition, importance, classification, structure and examples. There are a lot of examples here and it is for everyone that needs to know about money market.
Financial instruments are assets that have a monetary value or record.docxedmundp8cgllams
Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These financial instruments can be categorized on the basis of their issuers, maturity, risk, and ether factors. Identify the financial instruments based on the following descriptions. Which of the following are money market instruments? Check all that apply. Long-term bank loans Common stocks Eurodollar time deposits Bankers\' acceptarces Preferred stocks The process through which savings and loan associations (SSLs), banks, and entities such as Fannie Mae and Freddie Mac create financial instruments by combining ether financial assets, such as mortgages and credit card debt, is called
Solution
Description 1
Based on description it is classified as Treasury bills
Treasury bills are short-term securities issued by the U.S. Treasury. The Treasury sells bills at regularly scheduled auctions to refinance maEagleTraders.comg issues. It also helps to finance current federal deficits. They further sell bills on an irregular basis to smooth out the uneven flow of revenues from corporate and individual tax receipts.
Description 2
Based on description it is classified as Commercial Paper
Commercial Paper is a short-term unsecured promissory note issued by corporations and foreign governments. It is a low-cost alternative to bank loans, for many large, credit worthy issuers.  Issuers are able to efficiently raise large amounts of funds quickly and without expensive Securities and Exchange Commission (SEC) registration. They sell paper, either directly or through independent dealers, to a large and varied pool of institutional buyers. Investors in commercial paper earn competitive, market-determined yields in notes whose maturity and amounts can be tailored to their specific needs.
Description 3
Based on description it is classified as Shares in Money Market Instruments
Description 4
Based on description it is classified as Coprorate Debt Securities.
Follwoing are the money market instruments
Bankers Acceptances
Eurodollar Time Deposits
.
1 Role of Financial Markets and InstitutionsCHAPTER OBJECTIVES.docxlorainedeserre
1 Role of Financial Markets and Institutions
CHAPTER OBJECTIVES
The specific objectives of this chapter are to:
· ▪ describe the types of financial markets that facilitate the flow of funds,
· ▪ describe the types of securities traded within financial markets,
· ▪ describe the role of financial institutions within financial markets, and
· ▪ explain how financial institutions were exposed to the credit crisis.
A financial market is a market in which financial assets (securities) such as stocks and bonds can be purchased or sold. Funds are transferred in financial markets when one party purchases financial assets previously held by another party. Financial markets facilitate the flow of funds and thereby allow financing and investing by households, firms, and government agencies. This chapter provides some background on financial markets and on the financial institutions that participate in them.
1-1 ROLE OF FINANCIAL MARKETS
Financial markets transfer funds from those who have excess funds to those who need funds. They enable college students to obtain student loans, families to obtain mortgages, businesses to finance their growth, and governments to finance many of their expenditures. Many households and businesses with excess funds are willing to supply funds to financial markets because they earn a return on their investment. If funds were not supplied, the financial markets would not be able to transfer funds to those who need them.
Those participants who receive more money than they spend are referred to as surplus units (or investors). They provide their net savings to the financial markets. Those participants who spend more money than they receive are referred to as deficit units. They access funds from financial markets so that they can spend more money than they receive. Many individuals provide funds to financial markets in some periods and access funds in other periods.
EXAMPLE
College students are typically deficit units, as they often borrow from financial markets to support their education. After they obtain their degree, they earn more income than they spend and thus become surplus units by investing their excess funds. A few years later, they may become deficit units again by purchasing a home. At this stage, they may provide funds to and access funds from financial markets simultaneously. That is, they may periodically deposit savings in a financial institution while also borrowing a large amount of money from a financial institution to buy a home.
Many deficit units such as firms and government agencies access funds from financial markets by issuing securities, which represent a claim on the issuer. Debt securities represent debt (also called credit, or borrowed funds) incurred by the issuer. Deficit units that issue the debt securities are borrowers. The surplus units that purchase debt securities are creditors, and they receive interest on a periodic basis (such as every six months). Debt securities have a maturity da ...
First Things First: Building and Effective Marketing Strategy
Too many companies (and marketers) jump straight into activation planning without formalizing a marketing strategy. It may seem tedious, but analyzing the mindset of your targeted audiences and identifying the messaging points most likely to resonate with them is time well spent. That process is also a great opportunity for marketers to collaborate with sales leaders and account managers on a galvanized go-to-market approach. I’ll walk you through the methods and tools we use with our clients to ensure campaign success.
Key Takeaways:
-Recognize the critical role of strategy in marketing
-Learn our approach for building an actionable, effective marketing strategy
-Receive templates and guides for developing a marketing strategy
Financial instruments are assets that have a monetary value or record.docxedmundp8cgllams
Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These financial instruments can be categorized on the basis of their issuers, maturity, risk, and ether factors. Identify the financial instruments based on the following descriptions. Which of the following are money market instruments? Check all that apply. Long-term bank loans Common stocks Eurodollar time deposits Bankers\' acceptarces Preferred stocks The process through which savings and loan associations (SSLs), banks, and entities such as Fannie Mae and Freddie Mac create financial instruments by combining ether financial assets, such as mortgages and credit card debt, is called
Solution
Description 1
Based on description it is classified as Treasury bills
Treasury bills are short-term securities issued by the U.S. Treasury. The Treasury sells bills at regularly scheduled auctions to refinance maEagleTraders.comg issues. It also helps to finance current federal deficits. They further sell bills on an irregular basis to smooth out the uneven flow of revenues from corporate and individual tax receipts.
Description 2
Based on description it is classified as Commercial Paper
Commercial Paper is a short-term unsecured promissory note issued by corporations and foreign governments. It is a low-cost alternative to bank loans, for many large, credit worthy issuers.  Issuers are able to efficiently raise large amounts of funds quickly and without expensive Securities and Exchange Commission (SEC) registration. They sell paper, either directly or through independent dealers, to a large and varied pool of institutional buyers. Investors in commercial paper earn competitive, market-determined yields in notes whose maturity and amounts can be tailored to their specific needs.
Description 3
Based on description it is classified as Shares in Money Market Instruments
Description 4
Based on description it is classified as Coprorate Debt Securities.
Follwoing are the money market instruments
Bankers Acceptances
Eurodollar Time Deposits
.
1 Role of Financial Markets and InstitutionsCHAPTER OBJECTIVES.docxlorainedeserre
1 Role of Financial Markets and Institutions
CHAPTER OBJECTIVES
The specific objectives of this chapter are to:
· ▪ describe the types of financial markets that facilitate the flow of funds,
· ▪ describe the types of securities traded within financial markets,
· ▪ describe the role of financial institutions within financial markets, and
· ▪ explain how financial institutions were exposed to the credit crisis.
A financial market is a market in which financial assets (securities) such as stocks and bonds can be purchased or sold. Funds are transferred in financial markets when one party purchases financial assets previously held by another party. Financial markets facilitate the flow of funds and thereby allow financing and investing by households, firms, and government agencies. This chapter provides some background on financial markets and on the financial institutions that participate in them.
1-1 ROLE OF FINANCIAL MARKETS
Financial markets transfer funds from those who have excess funds to those who need funds. They enable college students to obtain student loans, families to obtain mortgages, businesses to finance their growth, and governments to finance many of their expenditures. Many households and businesses with excess funds are willing to supply funds to financial markets because they earn a return on their investment. If funds were not supplied, the financial markets would not be able to transfer funds to those who need them.
Those participants who receive more money than they spend are referred to as surplus units (or investors). They provide their net savings to the financial markets. Those participants who spend more money than they receive are referred to as deficit units. They access funds from financial markets so that they can spend more money than they receive. Many individuals provide funds to financial markets in some periods and access funds in other periods.
EXAMPLE
College students are typically deficit units, as they often borrow from financial markets to support their education. After they obtain their degree, they earn more income than they spend and thus become surplus units by investing their excess funds. A few years later, they may become deficit units again by purchasing a home. At this stage, they may provide funds to and access funds from financial markets simultaneously. That is, they may periodically deposit savings in a financial institution while also borrowing a large amount of money from a financial institution to buy a home.
Many deficit units such as firms and government agencies access funds from financial markets by issuing securities, which represent a claim on the issuer. Debt securities represent debt (also called credit, or borrowed funds) incurred by the issuer. Deficit units that issue the debt securities are borrowers. The surplus units that purchase debt securities are creditors, and they receive interest on a periodic basis (such as every six months). Debt securities have a maturity da ...
First Things First: Building and Effective Marketing Strategy
Too many companies (and marketers) jump straight into activation planning without formalizing a marketing strategy. It may seem tedious, but analyzing the mindset of your targeted audiences and identifying the messaging points most likely to resonate with them is time well spent. That process is also a great opportunity for marketers to collaborate with sales leaders and account managers on a galvanized go-to-market approach. I’ll walk you through the methods and tools we use with our clients to ensure campaign success.
Key Takeaways:
-Recognize the critical role of strategy in marketing
-Learn our approach for building an actionable, effective marketing strategy
-Receive templates and guides for developing a marketing strategy
Core Web Vitals SEO Workshop - improve your performance [pdf]Peter Mead
Core Web Vitals to improve your website performance for better SEO results with CWV.
CWV Topics include:
- Understanding the latest Core Web Vitals including the significance of LCP, INP and CLS + their impact on SEO
- Optimisation techniques from our experts on how to improve your CWV on platforms like WordPress and WP Engine
- The impact of user experience and SEO
How to Use AI to Write a High-Quality Article that Ranksminatamang0021
In the world of content creation, many AI bloggers have drifted away from their original vision, resulting in low-quality articles that search engines overlook. Don't let that happen to you! Join us to discover how to leverage AI tools effectively to craft high-quality content that not only captures your audience's attention but also ranks well on search engines.
Disclaimer: Some of the prompts mentioned here are the examples of Matt Diggity. Please use it as reference and make your own custom prompts.
For too many years marketing and sales have operated in silos...while in some forward thinking companies, the two organizations work together to drive new opportunity development and revenue. This session will explore the lessons learned in that beautiful dance that can occur when marketing and sales work together...to drive new opportunity development, account expansion and customer satisfaction.
No, this is not a conversation about MQLs and SQLs. Instead we will focus on a framework that allows the two organizations to drive company success together.
How to Run Landing Page Tests On and Off Paid Social PlatformsVWO
Join us for an exclusive webinar featuring Mariate, Alexandra and Nima where we will unveil a comprehensive blueprint for crafting a successful paid media strategy focused on landing page testing.With escalating costs in paid advertising, understanding how to maximize each visitor’s experience is crucial for retention and conversion.
This session will dive into the methodologies for executing and analyzing landing page tests within paid social channels, offering a blend of theoretical knowledge and practical insights.
The Pearmill team will guide you through the nuances of setting up and managing landing page experiments on paid social platforms. You will learn about the critical rules to follow, the structure of effective tests, optimal conversion duration and budget allocation.
The session will also cover data analysis techniques and criteria for graduating landing pages.
In the second part of the webinar, Pearmill will explore the use of A/B testing platforms. Discover common pitfalls to avoid in A/B testing and gain insights into analyzing A/B tests results effectively.
The digital marketing industry is changing faster than ever and those who don’t adapt with the times are losing market share. Where should marketers be focusing their efforts? What strategies are the experts seeing get the best results? Get up-to-speed with the latest industry insights, trends and predictions for the future in this panel discussion with some leading digital marketing experts.
Most small businesses struggle to see marketing results. In this session, we will eliminate any confusion about what to do next, solving your marketing problems so your business can thrive. You’ll learn how to create a foundational marketing OS (operating system) based on neuroscience and backed by real-world results. You’ll be taught how to develop deep customer connections, and how to have your CRM dynamically segment and sell at any stage in the customer’s journey. By the end of the session, you’ll remove confusion and chaos and replace it with clarity and confidence for long-term marketing success.
Key Takeaways:
• Uncover the power of a foundational marketing system that dynamically communicates with prospects and customers on autopilot.
• Harness neuroscience and Tribal Alignment to transform your communication strategies, turning potential clients into fans and those fans into loyal customers.
• Discover the art of automated segmentation, pinpointing your most lucrative customers and identifying the optimal moments for successful conversions.
• Streamline your business with a content production plan that eliminates guesswork, wasted time, and money.
The Secret to Engaging Modern Consumers: Journey Mapping and Personalization
In today's digital landscape, understanding the customer's journey and delivering personalized experiences are paramount. This masterclass delves into the art of consumer journey mapping, a powerful technique that visualizes the entire customer experience across touchpoints. Attendees will learn how to create detailed journey maps, identify pain points, and uncover opportunities for optimization. The presentation also explores personalization strategies that leverage data and technology to tailor content, products, and experiences to individual customers. From real-time personalization to predictive analytics, attendees will gain insights into cutting-edge approaches that drive engagement and loyalty.
Key Takeaways:
Current consumer landscape; Steps to mapping an effective consumer journey; Understanding the value of personalization; Integrating mapping and personalization for success; Brands that are getting It right!; Best Practices; Future Trends
Top 3 Ways to Align Sales and Marketing Teams for Rapid GrowthDemandbase
In this session, Demandbase’s Stephanie Quinn, Sr. Director of Integrated and Digital Marketing, Devin Rosenberg, Director of Sales, and Kevin Rooney, Senior Director of Sales Development will share how sales and marketing shapes their day-to-day and what key areas are needed for true alignment.
A.I. (artificial intelligence) platforms are popping up all the time, and many of them can and should be used to help grow your brand, increase your sales and decrease your marketing costs.In this presentation:We will review some of the best AI platforms that are available for you to use.We will interact with some of the platforms in real-time, so attendees can see how they work.We will also look at some current brands that are using AI to help them create marketing messages, saving them time and money in the process. Lastly, we will discuss the pros and cons of using AI in marketing & branding and have a lively conversation that includes comments from the audience.
Key Takeaways:
Attendees will learn about LLM platforms, like ChatGPT, and how they work, with preset examples and real time interactions with the platform. Attendees will learn about other AI platforms that are creating graphic design elements at the push of a button...pre-set examples and real-time interactions.Attendees will discuss the pros & cons of AI in marketing + branding and share their perspectives with one another. Attendees will learn about the cost savings and the time savings associated with using AI, should they choose to.
Is AI-Generated Content the Future of Content Creation?Cut-the-SaaS
Discover the transformative power of AI in content creation with our presentation, "Is AI-Generated Content the Future of Content Creation?" by Puran Parsani, CEO & Editor of Cut-The-SaaS. Learn how AI-generated content is revolutionizing marketing, publishing, education, healthcare, and finance by offering unprecedented efficiency, creativity, and scalability.
Understanding
AI-Generated Content:
AI-generated content includes text, images, videos, and audio produced by AI without direct human involvement. This technology leverages large datasets to create contextually relevant and coherent material, streamlining content production.
Key Benefits:
Content Creation: Rapidly generate high-quality content for blogs, articles, and social media.
Brainstorming: AI simulates conversations to inspire creative ideas.
Research Assistance: Efficiently summarize and research information.
Market Insights:
The content marketing industry is projected to grow to $17.6 billion by 2032, with AI-generated content expected to dominate over 55% of the market.
Case Study: CNET’s AI Content Controversy:
CNET’s use of AI for news articles led to public scrutiny due to factual inaccuracies, highlighting the need for transparency and human oversight.
Benefits Across Industries:
Marketing: Personalize content at scale and optimize engagement with predictive analytics.
Publishing: Automate content creation for faster publication cycles.
Education: Efficiently generate educational materials.
Healthcare: Create accurate content for patients and professionals.
Finance: Produce timely financial content for decision-making.
Challenges and Ethical Considerations:
Transparency: Disclose AI use to maintain trust.
Bias: Address potential AI biases with diverse datasets.
SEO: Ensure AI content meets SEO standards.
Quality: Maintain high standards to prevent misinformation.
Conclusion:
AI-generated content offers significant benefits in efficiency, personalization, and scalability. However, ethical considerations and quality assurance are crucial for responsible use. Explore the future of content creation with us and see how AI is transforming various industries.
Connect with Us:
Follow Cut-The-SaaS on LinkedIn, Instagram, YouTube, Twitter, and Medium. Visit cut-the-saas.com for more insights and resources.
Digital Commerce Lecture for Advanced Digital & Social Media Strategy at UCLA...Valters Lauzums
E-commerce in 2024 is characterized by a dynamic blend of opportunities and significant challenges. Supply chain disruptions and inventory shortages are critical issues, leading to increased shipping delays and rising costs, which impact timely delivery and squeeze profit margins. Efficient logistics management is essential, yet it is often hampered by these external factors. Payment processing, while needing to ensure security and user convenience, grapples with preventing fraud and integrating diverse payment methods, adding another layer of complexity. Furthermore, fulfillment operations require a streamlined approach to handle volume spikes and maintain accuracy in order picking, packing, and shipping, all while meeting customers' heightened expectations for faster delivery times.
Amid these operational challenges, customer data has emerged as an important strategy. By focusing on personalization and enhancing customer experience from historical behavior, businesses can deliver improved website and brand experienced, better product recommendations, optimal promotions, and content to meet individual preferences. Better data analytics can also help in effectively creating marketing campaigns, improving customer retention, and driving product development and inventory management.
Innovative formats such as social commerce and live shopping are beginning to impact the digital commerce landscape, offering new ways to engage with customers and drive sales, and may provide opportunity for brands that have been priced out or seen a downturn with post-pandemic shopping behavior. Social commerce integrates shopping experiences directly into social media platforms, tapping into the massive user bases of these networks to increase reach and engagement. Live shopping, on the other hand, combines entertainment and real-time interaction, providing a dynamic platform for showcasing products and encouraging immediate purchases. These innovations not only enhance customer engagement but also provide valuable data for businesses to refine their strategies and deliver superior shopping experiences.
The e-commerce sector is evolving rapidly, and businesses that effectively manage operational challenges and implement innovative strategies are best positioned for long-term success.
When most people in the industry talk about online or digital reputation management, what they're really saying is Google search and PPC. And it's usually reactive, left dealing with the aftermath of negative information published somewhere online. That's outdated. It leaves executives, organizations and other high-profile individuals at a high risk of a digital reputation attack that spans channels and tactics. But the tools needed to safeguard against an attack are more cybersecurity-oriented than most marketing and communications professionals can manage. Business leaders Leaders grasp the importance; 83% of executives place reputation in their top five areas of risk, yet only 23% are confident in their ability to address it. To succeed in 2024 and beyond, you need to turn online reputation on its axis and think like an attacker.\
Key Takeaways:
- New framework for examining and safeguarding an online reputation
- Tools and techniques to keep you a step ahead
- Practical examples that demonstrate when to act, how to act and how to recover
5 big bets to drive growth in 2024 without one additional marketing dollar AND how to adapt to the biggest shifting eCommerce trend- AI.
1) Romance Your Customers - Retention
2) ‘Alternative’ Lead Gen - Advocacy
3) The Beautiful Basics - Conversion Rate Optimization
4) Land that Bottom Line - Profitability
5) Roll the Dice - New Business Models
Mastering Local SEO for Service Businesses in the AI Era is tailored specifically for local service providers like plumbers, dentists, and others seeking to dominate their local search landscape. This session delves into leveraging AI advancements to enhance your online visibility and search rankings through the Content Factory model, designed for creating high-impact, SEO-driven content. Discover the Dollar-a-Day advertising strategy, a cost-effective approach to boost your local SEO efforts and attract more customers with minimal investment. Gain practical insights on optimizing your online presence to meet the specific needs of local service seekers, ensuring your business not only appears but stands out in local searches. This concise, action-oriented workshop is your roadmap to navigating the complexities of digital marketing in the AI age, driving more leads, conversions, and ultimately, success for your local service business.
Key Takeaways:
Embrace AI for Local SEO: Learn to harness the power of AI technologies to optimize your website and content for local search. Understand the pivotal role AI plays in analyzing search trends and consumer behavior, enabling you to tailor your SEO strategies to meet the specific demands of your target local audience. Leverage the Content Factory Model: Discover the step-by-step process of creating SEO-optimized content at scale. This approach ensures a steady stream of high-quality content that engages local customers and boosts your search rankings. Get an action guide on implementing this model, complete with templates and scheduling strategies to maintain a consistent online presence. Maximize ROI with Dollar-a-Day Advertising: Dive into the cost-effective Dollar-a-Day advertising strategy that amplifies your visibility in local searches without breaking the bank. Learn how to strategically allocate your budget across platforms to target potential local customers effectively. The session includes an action guide on setting up, monitoring, and optimizing your ad campaigns to ensure maximum impact with minimal investment.
10 Video Ideas Any Business Can Make RIGHT NOW!
You'll never draw a blank again on what kind of video to make for your business. Go beyond the basic categories and truly reimagine a brand new advanced way to brainstorm video content creation. During this masterclass you'll be challenged to think creatively and outside of the box and view your videos through lenses you may have never thought of previously. It's guaranteed that you'll leave with more than 10 video ideas, but I like to under-promise and over-deliver. Don't miss this session.
Key Takeaways:
How to use the Video Matrix
How to use additional "Lenses"
Where to source original video ideas
10 Videos Any Business Can Make Right Now! - Shelly Nathan
money-market-1(1).pdf
1. 1
The Money Market
Timothy Q. Cook and Robert K. LaRoche
The major purpose of financial markets is
to transfer funds from lenders to borrowers.
Financial market participants commonly
distinguish between the "capital market" and
the "money market," with the latter term
generally referring to borrowing and lending
for periods of a year or less. The United
States money market is very efficient in that it
enables large sums of money to be transferred
quickly and at a low cost from one economic
unit (business, government, bank, etc.) to
another for relatively short periods of time.
The need for a money market arises
because receipts of economic units do not
coincide with their expenditures. These units
can hold money balances— that is,
transactions balances in the form of currency,
demand deposits, or NOW accounts— to
insure that planned expenditures can be
maintained independently of cash receipts.
Holding these balances, however, involves a
cost in the form of foregone interest. To
minimize this cost, economic units usually
seek to hold the minimum money balances
required for day-to-day transactions. They
supplement these balances with holdings of
money market instruments that can be
converted to cash quickly and at a relatively
low cost and that have low price risk due to
their short maturities. Economic units can
also meet their short-term cash demands by
maintaining access to the money market and
raising funds there when required.
Money market instruments are generally
characterized by a high degree of safety of
principal and are most commonly issued in
units of $1 million or more. Maturities range
from one day to one year; the most common
are three months or less. Active secondary
markets for most of the instruments allow
them to be sold prior to maturity. Unlike
organized securities or commodities
exchanges, the money market has no specific
location. It is centered in New York, but
since it is primarily a telephone market it is
easily accessible from all parts of the nation
as well as from foreign financial centers.
The money market encompasses a group
of short-term credit market instruments,
futures market instruments, and the Federal
Reserve's discount window. The table
summarizes the instruments of the money
market. The major participants in the money
market are commercial banks, governments,
corporations, government-sponsored
enterprises, money market mutual funds,
futures market exchanges, brokers and
dealers, and the Federal Reserve.
READING 1
Reprinted from Instruments of the Money Market edited by Timothy Q. Cook and Robert K. LaRoche, Federal Reserve Bank
of Richmond, 1993, 1-5.
2. PART I Introduction
2
The Money Market
Instrument Principal Borrowers
Federal Funds Banks
Discount Window Banks
Negotiable Certificates of Deposit (CDs) Banks
Eurodollar Time Deposits and CDs Banks
Repurchase Agreements Securities dealers, banks, nonfinancial corporations,
governments (principal participants)
Treasury Bills U.S. government
Municipal Notes State and local governments
Commercial Paper Nonfinancial and financial businesses
Bankers Acceptances Nonfinancial and financial businesses
Government-Sponsored Enterprise
Securities
Farm Credit System, Federal Home Loan Bank System,
Federal National Mortgage Association
Shares in Money Market Instruments Money market funds, local government investment
pools, short-term investment funds
Futures Contracts Dealers, banks (principal users)
Futures Options Dealers, banks (principal users)
Swaps Banks (principal dealers)
3. READING 1 The Money Market
3
COMMERCIAL BANKS
Banks play three important roles in the
money market. First, they borrow in the
money market to fund their loan portfolios
and to acquire funds to satisfy noninterest-
bearing reserve requirements at Federal
Reserve Banks. Banks are the major
participants in the market for federal funds,
which are very short-term— chiefly
overnight— loans of immediately available
money; that is, funds that can be transferred
between banks within a single business day.
The funds market efficiently distributes
reserves throughout the banking system. The
borrowing and lending of reserves takes place
at a competitively determined interest rate
known as the federal funds rate.
Banks and other depository institutions
can also borrow on a short-term basis at the
Federal Reserve discount window and pay a
rate of interest set by the Federal Reserve
called the discount rate. A bank's decision to
borrow at the discount window depends on
the relation of the discount rate to the federal
funds rate, as well as on the administrative
arrangements surrounding the use of the
window.
Banks also borrow funds in the money
market for longer periods by issuing large
negotiable certificates of deposit (CDs) and by
acquiring funds in the Eurodollar market. A
large denomination CD is a certificate issued
by a bank as evidence that a certain amount
of money has been deposited for a period of
time— usually ranging from one to six
months— and will be redeemed with interest
at maturity. Eurodollars are dollar-
denominated deposit liabilities of banks
located outside the United States (or of
International Banking Facilities in the United
States). They can be either large CDs or
nonnegotiable time deposits. U.S. banks raise
funds in the Eurodollar market through their
overseas branches and subsidiaries.
A final way banks raise funds in the
money market is through repurchase
agreements (RPs). An RP is a sale of
securities with a simultaneous agreement by
the seller to repurchase them at a later date.
(For the lender— that is, the buyer of the
securities in such a transaction— the
agreement is often called a reverse RP.) In
effect this agreement (when properly
executed) is a short-term collateralized loan.
Most RPs involve U.S. government securities
or securities issued by government-sponsored
enterprises. Banks are active participants on
the borrowing side of the RP market.
A second important role of banks in the
money market is as dealers in the market for
over-the-counter interest rate derivatives,
which has grown rapidly in recent years.
Over-the-counter interest rate derivatives set
terms for the exchange of cash payments
based on subsequent changes in market
interest rates. For example, in an interest rate
swap, the parties to the agreement exchange
cash payments to one another based on
movements in specified market interest rates.
Banks frequently act as middleman in swap
transactions by serving as a counterparty to
both sides of the transaction.
A third role of banks in the money
market is to provide, in exchange for fees,
commitments that help insure that investors
in money market securities will be paid on a
timely basis. One type of commitment is a
backup line of credit to issuers of money
market securities, which is typically
4. PART I Introduction
4
dependent on the financial condition of the
issuer and can be withdrawn if that condition
deteriorates. Another type of commitment is
a credit enhancement— generally in the form
of a letter of credit— that guarantees that the
bank will redeem a security upon maturity if
the issuer does not. Backup lines of credit
and letters of credit are widely used by
commercial paper issuers and by issuers of
municipal securities.
GOVERNMENTS
The U.S. Treasury and state and local
governments raise large sums in the money
market. The Treasury raises funds in the
money market by selling short-term
obligations of the U.S. government called
Treasury bills. Bills have the largest volume
outstanding and the most active secondary
market of any money market instrument.
Because bills are generally considered to be
free of default risk, while other money market
instruments have some default risk, bills
typically have the lowest interest rate at a
given maturity. State and local governments
raise funds in the money market through the
sale of both fixed-and variable-rate securities.
A key feature of state and local securities is
that their interest income is generally exempt
from federal income taxes, which makes them
particularly attractive to investors in high
income tax brackets.
CORPORATIONS
Nonfinancial and nonbank financial
businesses raise funds in the money market
primarily by issuing commercial paper, which
is a short-term unsecured promissory note. In
recent years an increasing number of firms
have gained access to this market, and
commercial paper has grown at a rapid pace.
Business enterprises— generally those
involved in international trade— also raise
funds in the money market through bankers
acceptances. A bankers acceptance is a time
draft drawn on and accepted by a bank (after
which the draft becomes an unconditional
liability of the bank). In a typical bankers
acceptance a bank accepts a time draft from
an importer and then discounts it (gives the
importer slightly less than the face value of
the draft). The importer then uses the
proceeds to pay the exporter. The bank may
hold the acceptance itself or rediscount (sell)
it in the secondary market.
GOVERNMENT-SPONSORED
ENTERPRISES
Government-sponsored enterprises are a
group of privately owned financial
intermediaries with certain unique ties to the
federal government. These agencies borrow
funds in the financial markets and channel
these funds primarily to the farming and
housing sectors of the economy. They raise a
substantial part of their funds in the money
market.
5. READING 1 The Money Market
5
MONEY MARKET MUTUAL
FUNDS AND OTHER SHORT-
TERM INVESTMENT POOLS
Short-term investment pools are a highly
specialized group of money market
intermediaries that includes money market
mutual funds, local government investment
pools, and short-term investment funds of
bank trust departments. These intermediaries
purchase large pools of money market
instruments and sell shares in these
instruments to investors. In doing so they
enable individuals and other small investors
to earn the yields available on money market
instruments. These pools, which were
virtually nonexistent before the mid-1970s,
have grown to be one of the largest financial
intermediaries in the United States.
FUTURES EXCHANGES
Money market futures contracts and
futures options are traded on organized
exchanges which set and enforce trading
rules. A money market futures contract is a
standardized agreement to buy or sell a
money market security at a particular price on
a specified future date. There are actively
traded contracts for 13-week Treasury bills,
three-month Eurodollar time deposits, and
one-month Eurodollar time deposits. There is
also a futures contract based on a 30-day
average of the daily federal funds rate.
A money market futures option gives the
holder the right, but not the obligation, to buy
or sell a money market futures contract at a
set price on or before a specified date.
Options are currently traded on three-month
Treasury bill futures, three-month Eurodollar
futures, and one-month Eurodollar futures.
DEALERS AND BROKERS
The smooth functioning of the money
market depends critically on brokers and
dealers, who play a key role in marketing new
issues of money market instruments and in
providing secondary markets where
outstanding issues can be sole prior to
maturity. Dealers use RPs to finance their
inventories of securities. Dealers also act as
intermediaries between other participants in
the RP market by making loans to those
wishing to borrow in the market and
borrowing from those wishing to lend in the
market.
Brokers match buyers and sellers of
money market instruments on a commission
basis. Brokers play a major role in linking
borrowers and lenders in the federal funds
market and are also active in a number of
other markets as intermediaries in trade
between dealers.
FEDERAL RESERVE
The Federal Reserve is a key participant
in the money market. The Federal Reserve
controls the supply of reserves available to
banks and other depository institutions
primarily through the purchase and sale of
Treasury bills, either outright in the bill
market or on a temporary basis in the market
for repurchase agreements. By controlling
6. PART I Introduction
6
the supply of reserves, the Federal Reserve is
able to influence the federal funds rate.
Movements in this rate, in turn, can have
pervasive effects on other money market
rates. The Federal Reserve's purchases and
sales of Treasury bills— called "open market
operations"— are carried out by the Open
Market Trading Desk at the Federal Reserve
Bank of New York. The Trading Desk
frequently engages in billions of dollars of
open market operations in a single day.
The Federal Reserve can also influence
reserves and money market rates through its
administration of the discount window and
the discount rate. Under certain Federal
Reserve operating procedures, changes in the
discount rate have a strong direct effect on the
funds rate and other money market rates.
Because of their roles in the implementation
of monetary policy, the discount window and
the discount rate are of widespread interest in
the financial markets.