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Money Market - Coggle Diagram
Money Market
Economic Role
Store liquidity by investing in MM securities
Buy liquidity by issuing securities
Overview of MM
Large/ wholesale open market transactions
Centralized safekeeping
Good Marketability -Secondary Market
Many brokers & dealers involve in MM
Payment in Federal Funds (immediately available funds)
Commercial Bank
Assets or Investments
Agency securities
Types
Housing Credit Agencies
loans support for mortgage market
Other agencies
Special Purposes
Federal Financing Bank
Buy agencies's securitties & issue its own obligations
Characteristics
Most be not guaranteed by federal gov.
Yield: higher than T.Bills
greater default risk
Lower Marketability
Banker's Acceptance (from other banks)
Treasury Bills
Characteristics
Maturities: =< 1 year
Denomination: multiple with $1000
Sold on discount basis
Book- entry Securities
only record entries
Book-entry record keeping
Most marketable Treasury debt: in book-entry form
Federal Funds Sold
Repurchase Agreements
Bank Financing
Source of Fund
Bank Investment
Liabilities
Commercial paper
Characteristics
Short term ( only 270 days), unsecured
Issued by high-quality borrowers
Directly or dealer sold at discount from par
Bank's Acceptance
Characteristics
Negotiables CDs
Characteristics
Issue at FV with coupon rate
Negotiable: maybe traded before maturity
< 6 month's maturity
CD market
Rate: negotiated betw Buyer & Seller
Market: sensitive when rate below or above market rates
Bought mainly by corporation businesses
Federal Funds purchased
Characteristics of MM
Low Default risk
Short maturity
High marketability