In general, money markets are used to buy and sell various forms of short-term credits, which are called money market instruments. These instruments are liquid and have maturities ranging from one day up to one year. Some of these instruments are the federal agency notes, repurchase agreements, bankers’ acceptances, tax examples for short-terms and certificates of deposit.
In fact, the money markets proceed as a safe haven for your short-term funds. In global Forex, large companies take part in money markets via dealers. They manage their short-term funds themselves.
Money market securities are not prevented from risks, though they decrease their intensity. This little risk is a result of the fact that banks can also fail. The low risks are concerned the lenders that you choose.
Different Money Market Instruments:
Federal Agency Notes
Short-term and long-term requirements are issued by some federal agencies.
Treasury securities, bought by dealers, are called repurchase agreements. Ranging from 24 hours to several days and months, these instruments are likely to be more liquid than any other money market investment. They have much similarity with the bank deposit accounts. Some corporations have such agreements with their bank that the excess amount is automatically transferred to such funds.
Tax examples for short-terms
Public government and states issue these short-term notes. The risk involved in them is not low.
Foreign trades are generally financed through bankers’ acceptance. Companies also use them, while financing their inventory or buying goods on credit.
Certificates of Deposit
Federally licensed banks circulate these certificates of deposit. They circulate them on the basis of deposited funds and specified returns, which can be got after predefined time period.
Individuals or the associations that supply the resources for these money markets prefer high liquidity and less risk. The value of common money market instruments are about one million dollar.