The Money Market is the financial market for short-term borrowing and lending, usually up to a time span of thirteen months. This contrasts with the capital market for longer-term funds that feature within the Market.
This is the place where banks lend to and borrow from each other, short-term financial instruments, for instance certificates of deposit or enter into agreements, repurchase agreements are taken place.
It provides short to medium term liquidity aspect element within the global financial system. Money Market derivatives include forward rate agreements and short-term interest rate futures.
The Market is a subsection of the fixed income market. We usually think of the term fixed income as being synonymous to bonds. In reality, a bond is just one sort of fixed income security.
The difference between the Money Market and the bond market is that the money market specializes in very short-term debt securities that is debts that mature in less than one year time span. Money investments can also be termed as the cash investments because of their short maturities.
Money Market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and are considered unusually safe. As they are extremely conservative, Money Market securities offer significantly lower returns than most other securities.
Comparing the Money Market with the Stock market
The major difference between the Money Market and the stock market is that most Money Market securities trade in very high denominations. This, in turn restricts access for the individual investor.
Furthermore, the Money Market is also a dealer market, which means that firms buy and sell securities in their own accounts, at their own risk. Comparing this to the stock market where a broker receives commission to act as an agent, while the investor takes the risk of holding the stock.
Another characteristic of a dealer market is the lack of a central trading floor or exchange. Deals are transacted over the phone or through the use of electronic systems.
These accounts and funds pool together the assets of thousands of investors in order to buy the securities on their behalf. However, some Money Market instruments like the Treasury bills can be purchased directly and if you fail to acquire that, they can be acquired through other large financial institutions with direct access to these types of markets.
Understanding the Money Market better
There are tons of different instruments within the markets that are offering various returns at various risks, which is an aspect element within the sections that take a look at the major Money Market instruments.
Also a better-known place for large institutions and government to manage their short-term cash needs is the Money Market. However, individual investors have access to the market through a variety of different securities.
These types of markets specialize in debt securities that mostly mature in less than one year. These securities are very liquid, and are considered very safe and as a result, they often offer a lower return than other securities. The easiest way for consumers to gain access to the Money Market is through a mutual fund.
Some terms that are used in the this markets are the T-bills, which are short-term government securities that mature in one year or less from their issue date and are considered to be one of the leading safest investments - they do not provide a fantastic return.
Another term that is used in the Money Market is a certificate of deposit, which is a time deposit with a bank. Annual percentage yield takes into account compound interest, annual percentage rate does not.
Certificate Deposits are safe, but the returns aren't wonderful, and your money is tied up for the length of the deposit. Commercial paper is an unsecured, short-term loan issued by a corporation. In the Money Market returns are higher than T-bills because of the higher default risk.The banker's acceptances are negotiable time draft for financing transactions in goods. They are new in international trade and are commonly only available to individuals through the funds.
The Eurodollars are U.S. dollar-denominated deposit at banks outside of the United States. The average Eurodollar deposit is very large and the only way for consumers to invest in this market is indirectly through a Money Market fund.
Hence, we can now understand that a Money Market can surely make a difference in the financial matters of a country.
- Related Videos
- Related Articles
- Ask / Related Q&A
- These Is What A Money Market Investment Entails
- Money Market Mutual Funds
- Instruments That Are Common In The Money Market
- Explaining the Money Market
- The Knowledge of Money Markets
- What Are Money Market Funds?
- The India Money Market Fall Since September 2008
- The difference between money market accounts and certificates of deposit




Here Are Some Memoir Writing Tips
By: Trevor Johnson | 06/12/2009Here are some memoir writing tips. The telling of stories is at least as old as the tribal campfire. In stories we commiserate we enlighten we instruct. We pass along traditions and secure history. We ask questions and conjure up answers.
Using Your Bad Looks to Your Advantage
By: Kasan Groupe | 04/12/2009Many people focus on all of the advantages of being good looking but forget that there are some great advantages to being bad looking and homely as well. Here are some advantages in life to being less than beautiful—far, far less.
Diabetes a growing health issue in thhe western world
By: anthony turner | 04/12/2009Diabetes a growing health issue in the western world: In the 21st century, even people suffering from diabetes can eat great food.
In Bible versus Quran: When God sends a curse upon the priests
By: Prof.dr. Ibrahim Khalil | 03/12/2009In the Bible, The Lord God says unto the priests: I will send a curse upon you, and I will curse your blessings; Yes, I have already cursed them, because you have not set your heart to honor me. In the Quran, Monasticism is man invented; it is not prescribed by Allah.
How To Write Memoirs - The Basic Principles
By: Trevor Johnson | 27/11/2009Many of us have at some stage of our lives thought about writing down our life experiences. But the idea often passes as quickly as it arrives. Most of us plainly don't know the basis principles of how to write memoirs.
THE VIBRANT SHADES OF VERMILLION
By: mamta | 27/11/2009The changes I underwent in life led me from a hatefulness to a strange fondness for the color red.. We always tend to relate colors with different moods and stages of our life..vibrant shades of vermillion brings about a few experiences that my heart encountered!
Random Things that Wake Me Up at Night
By: Kasan Groupe | 24/11/2009Title really says it all.
In Bible versus Quran: the Ostrich Forgets that a Foot may crush her Eggs
By: Prof.dr. Ibrahim Khalil | 23/11/2009The Bible says that the ostrich forgets that a foot may crush her eggs or that the wild beast may break and trample them. The ostrich is not mentioned therein in the Quran. On the other hand, the Quran says that the birds in general live in societies like human beings.
Role of Online Brokers
By: William Smith | 08/12/2006 | FinanceOnline Brokers are people or companies who buys and sells stocks on behalf of another person or a company
Welcome to Online Stock Trading!
By: William Smith | 08/12/2006 | FinanceMany independent investors that no longer seek the help or advice of the most common stock brokers make the choice to Online Stock Trading.
Explaining Penny Stocks
By: William Smith | 08/12/2006 | Non-FictionPenny Stocks are amongst the most uncertain and unpredictable investments you can easily make in today's financial markets.
Discount Brokers vs. Full-Service Brokers
By: William Smith | 08/12/2006 | FinanceDiscount brokers are stockbrokers who don't give investment advice.
Explaining the Money Market
By: William Smith | 08/12/2006 | Non-FictionThe Money Market is the financial market for short-term borrowing and lending, usually up to a time span of thirteen months.
Financial Planning - The Key to Your Lifelong Success
By: William Smith | 08/12/2006 | FinanceFinancial planning is not limited to asset allocation, mutual funds, and fixed-income investments - financial planning should include every aspect of your life.
Explaining Online Broker
By: William Smith | 08/12/2006 | FinanceThe Online Broker removes the confusion and makes the process of obtaining a loan simple, clear and economical.
What is Online Forex Trading?
By: William Smith | 08/12/2006 | FinanceOnline Forex Trading is the arena where a nation's currency is exchanged for that of another currency of another nation.