Money Market..
February 15, 08 by FinanceTurfMoney market is the market for short term funds meant for use for a period of up to 1 year.
Money market provides means for raising funds for meeting short term requirements so cash on one hand, and the deployment of surplus funds for short periods on the other.
The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time.
Money market trades in short term financial instruments commonly called "paper".
This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. The money market is not a particular place in a geographical sense.
It is a term to describe all organizations and institutions which deal or facilitate dealings in short term debt instruments.
These instruments include the Reserve Bank, the State Bank of India, other commercial banks, cooperative banks, LIC, GIC, and UTI.
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Common Money Market Instruments are:-
• Banker’s acceptance - A draft issued by a bank that will be accepted for payment, effectively the same as a cashier’s check.
• Certificate of deposit - A time deposit at a bank with a specific maturity date; large-denomination certificates of deposits can be sold before maturity.
• Repurchase agreements - Short-term loans-normally for less than two weeks and frequently for one day-arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.
• Commercial paper - An unsecured promissory notes with a fixed maturity of one to 270 days; usually sold at a discount from face value.
• Treasury bills - Short-term debt obligations of a national government that are issued to mature in 3 to 12 months.
• Money market mutual funds - Pooled short maturity, high quality investments which buy money market securities on behalf of retail or institutional investors.
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