Money Markets:
Money markets are a part of economic markets and are used for borrowing or lending assets for shorter time periods. The common examples of money markets that are traded include the treasury bills, certificate of deposits, federal funds and assets supported securities. Such money is important to fund the short-term projects as it is highly liquid. The money market is usually handled by the large financial institutions or small dealers who are interested in borrowing and lending. Such money is traded in the forms of paper, which is a common financial instrument. Such short-term and highly liquid assets are often used by the banks to finance their day to day operations. Moreover, these money markets are also used by the state to fund their activities.
Types of money market funds:
There are many types and kinds of money market funds used by the banks and state to borrow or lend money. Here we will discuss some of the most common money markets finds used by the state or banks.
• Treasury bills: The treasury bills are the most familiar form of money market instruments. These instruments are offered by the state to fund their deficits and to balance the flow of money between the public and the corporate.
• Certificate of deposits: The certificates of deposits are money market instruments that are issued by the banks. These certificates provide the proof of the amount deposited, its maturity date and the interest rate that will be provided on it. The deposits are then used by the banks to manage their finances and liability conditions.
• Commercial paper: Commercial paper is another instrument of money market and is issued by the corporations. It is a type of unsecured short-term loan which corporation issue to meet their inventorial needs.
• Floating rates notes: these are another common instrument of markets money and is issued by the registered banks of the state. This instrument has a variable coupon rate and it is adjusted with the changes in the market interest rate.
Advantage of money markets:
Market money is the short-term loans that are highly liquid and have the maturity date of almost a year or less than a year. The advantages of money markets in the financial market cannot be neglected as through these loans many short-term projects or needs of financial institutions are met. The money market instruments are important for any economy of the world because they increase the overall savings and are easy to cash. Moreover, these instruments help in keeping a regular flow of money from the individual to the institutions. These instruments are preferred by many individuals because they are affordable, less risky and can easily be bought. The money markets funds not only provide the benefit for the general public, but also help the state is covering their budget deficit and financing any short-term projects.
The key players in money markets:
The key players in the money markets is the state banks, private and the commercial banks and the government certified financial institutions. Along with these large players in the money markets, there are certain individual and small firms too, which deals in such instruments.
