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2nd Assignment
TOPIC: CRITICALY EXAMINE THE FEATURES OF VAIOUS COMMON MONEY MARKET INSTRUMENTS.
Submitted to: Sir Waqar Akbar Submitted by: Ishtiaq Ahmed (0333-6824303) AH-526270
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ACKNOWLEDGEMENT
All praises to Almighty Allah, the most Gracious, the most Beneficent and the most Merciful, who enabled me to complete this assignment. I feel great pleasure in expressing my since gratitude to my teacher, for his guidance and support for providing me an opportunity to complete my Project. My special thanks and acknowledgments to Mr. Ishtiaq Ahmed for providing me all relative information, guidance and support to compile the Project. I will keep my hopes alive for the success of given task to submit this report to my honorable teacher Sir Waqar Akbar, whose guidance; support and encouragement enable me to complete this assignment.
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EXECUTIVE SUMMARY
The todays world moves at neck breaking speed & it calls for a decisive action Quantum Leap thinking The topic which was assign was Critically examine the features of various common money market instruments The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. 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, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." In the United States, federal, state and local governments all issue paper to meet funding needs. States and local governments issue municipal paper, while the US Treasury issues Treasury bills to fund the US public debt. These are some Common money market instruments with different features, Certificate of deposit, Repurchase agreement, Commercial paper, Eurodollar, Federal funds, Municipal bond, Treasury bills, Money market fund and Foreign exchange swap.
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Table of Contents
Table of Contents Title page Acknowledgement Executive Summary Table of contents Introduction to the issue Practical study of issue Conclusion References Page No 01 02 03 04 05 07 26 27
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one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, federal funds, and short-lived mortgage- and asset-backed securities. It provides liquidity funding for the global financial system.
Overview:
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, typically up to thirteen months. 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 core of the money market consists of interbank lending--banks borrowing and lending to each other using commercial paper, repurchase agreements and similar instruments. These instruments are often benchmarked to (i.e. priced by reference to) the London Interbank Offered Rate (LIBOR) for the appropriate term and currency. Finance companies, such as GMAC, typically fund themselves by issuing large amounts of asset-backed commercial paper (ABCP) which is secured by the pledge of eligible assets into an ABCP conduit. Examples of eligible assets include auto loans, credit card receivables, residential/commercial mortgage loans, mortgage-backed securities and similar financial assets. Certain large corporations with strong credit ratings, such as General Electric, issue commercial paper on their own credit. Other large corporations arrange for banks to issue commercial paper on their behalf via commercial paper lines. In the United States, federal, state and local governments all issue paper to meet funding needs. States and local governments issue municipal paper, while the US Treasury issues Treasury bills to fund the US public debt.
Trading companies often purchase bankers' acceptances to be tendered for payment to overseas suppliers. Retail and institutional money market funds Banks Central banks Cash management programs Arbitrage ABCP conduits, which seek to buy higher yielding paper, while themselves selling cheaper paper.
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Merchant Banks
Group of many different markets for many different instruments Runs on the basis of market mechanism, where demand and supply of money shapes the market Creditworthiness of the participant is important
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Certificate of deposit:
A certificate of Deposit (CD) is a time deposit, a financial product commonly offered to consumers in the United States by banks, thrift institutions, and credit unions. CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank". CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions. They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest. In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation. Fixed rates are common, but some institutions offer CDs with various forms of variable rates. For example, in mid-2004, interest rates were expected to rise; many banks and credit unions began to offer CDs with a "bump-up" feature. These allow for a single readjustment of the interest rate, at a time of the consumer's choosing, during the term of the CD. Sometimes, CDs that are indexed to the stock market, the bond market, or other indices are introduced. A few general guidelines for interest rates are: A larger principal should receive a higher interest rate, but may not. A longer term will usually receive a higher interest rate, except in the case of an inverted yield curve (i.e. preceding a recession) Smaller institutions tend to offer higher interest rates than larger ones. Personal CD accounts generally receive higher interest rates than business CD accounts. Banks and credit unions that are not insured by the FDIC or NCUA generally offer higher interest rates
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CDs" with minimum deposits of $100,000. However there are also institutions that do the opposite and offer lower rates for their "Jumbo CDs". The consumer who opens a CD may receive a passbook or paper certificate. It is now common for a CD to consist simply of a book entry and an item shown in the consumer's periodic bank statements; that is, there is usually no "certificate" as such.
Closing a CD:
Withdrawals before maturity are usually subject to a substantial penalty. For a five-year CD, this is often the loss of six months' interest. These penalties ensure that it is generally not in a holder's best interest to withdraw the money before maturityunless the holder has another investment with significantly higher return or has a serious need for the money. Banks will charge a penalty fee if the money is withdrawn from the CD before it matures. Commonly, institutions mail a notice to the CD holder shortly before the CD matures requesting directions. The notice usually offers the choice of withdrawing the principal and accumulated interest or "rolling it over" (depositing it into a new CD). Generally, a "window" is allowed after maturity where the CD holder can cash in the CD without penalty. In the absence of such directions, it is common for the institution to roll over the CD automatically, once again tying up the money for a period of time (though the CD holder may be able to specify at the time the CD is opened not to roll over the CD).
CD refinances:
In the U.S. insured CDs are required by the Truth in Savings Regulation DD to state at the time of account opening the penalty for early withdrawal. These penalties cannot be revised by the depository prior to maturity. The penalty for early withdrawal is the deterrent to allowing depositors to take advantage of subsequent enhanced investment opportunities during the term of the CD. In rising interest rate environments the penalty may be insufficient to discourage depositors from redeeming their deposit and reinvesting the proceeds after paying
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the applicable early withdrawal penalty. The added interest from the new higher yielding CD may more than offset the cost of the early withdrawal penalty.
Repurchase agreement:
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. It was invented in the late 1800's by Rohini Bahirathan. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as a borrower, using their security as collateral for a secured cash loan at a fixed rate of interest. A repo is equivalent to a cash transaction combined with a forward contract. The cash transaction results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is effectively the interest on the loan while one of the settlement date of the forward contract is the maturity date of the loan.
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to the owner of the securities) falling due while the repo buyer owns the securities are, in fact, usually passed directly onto the repo seller. This might seem counterintuitive, as the legal ownership of the collateral rests with the buyer during the repo agreement. The agreement might instead provide that the buyer receives the coupon, with the cash payable on repurchase being adjusted to compensate, though this is more typical of sell/buybacks. Although the transaction is similar to a loan, and its economic effect is similar to a loan, the terminology differs from that applying to loans: the seller legally repurchases the securities from the buyer at the end of the loan term. However a key aspect of repos is that they are legally recognized as a single transaction (important in the event of counterparty insolvency) and not as a disposal and a repurchase for tax purposes. The following table summarizes the terminology: Participant Repo Borrower Seller Near leg Far leg Cash receiver Sells securities Buys securities Reverse repo Lender Buyer Cash provider Buys securities Sells securities
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Commercial paper:
In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued (sold) by large banks and corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks' rates. There are two methods of issuing paper. The issuer can market the securities directly to a buy and hold investor such as most money market funds. Alternatively, it can sell the paper to a dealer, who then sells the paper in the market. The dealer market for commercial paper involves large securities firms and subsidiaries of bank holding companies. Most of these firms also are dealers in US Treasury securities. Direct issuers of commercial paper usually are financial companies that have frequent and sizable borrowing needs and find it more economical to sell paper without the use of an intermediary. In the United States, direct issuers save a dealer fee of approximately 5 basis points, or 0.05% annualized, which translates to $50,000 on every $100 million outstanding. This saving compensates for the cost of maintaining a permanent sales staff to market the paper. Dealer fees tend to be lower outside the United States.
Line of credit:
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Commercial paper is a lower cost alternative to a line of credit with a bank. Once a business becomes established, and builds a high credit rating, it is often cheaper to draw on a commercial paper than on a bank line of credit. Nevertheless, many companies still maintain bank lines of credit as a "backup". Banks often charge fees for the amount of the line of the credit that does not have a balance. While these fees may seem like pure profit for banks, in some cases companies in serious trouble may not be able to repay the loan resulting in a loss for the banks.
High credit ratings fetch a lower cost of capital. Wide range of maturity provide more flexibility. It does not create any lien on asset of the company. Tradability of Commercial Paper provides investors with exit options.
Its usage is limited to only blue chip companies. Issuances of Commercial Paper bring down the bank credit limits. A high degree of control is exercised on issue of Commercial Paper. Stand-by credit may become necessary
Eurodollar:
Eurodollars are time deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve. Consequently, such deposits are subject to much less regulation than similar deposits within the U.S., allowing for higher margins. The term was originally coined for U.S. dollars in European
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banks, but it expanded over the years to its present definition: a U.S. dollar-denominated deposit in Tokyo or Beijing would be likewise deemed a Eurodollar deposit. There is no connection with the euro currency or the euro zone. More generally, the "euro" prefix can be used to indicate any currency held in a country where it is not the official currency: for example, euroyen or even euroeuro.
Market size:
The Eurodollar market is by a wide margin the largest source of global finance. In 1997, nearly 90% of all international loans were made this way.
Futures contracts:
The Eurodollar futures contract refers to the financial futures contract based upon these deposits, traded at the Chicago Mercantile Exchange (CME) in Chicago. Eurodollar futures are a way for companies and banks to lock in an interest rate today, for money it intends to borrow or lend in the future. Each CME Eurodollar futures contract has a notional or "face value" of $1,000,000, though the leverage used in futures allows one contract to be traded with a margin of about one thousand dollars. The minimum fluctuation in a Eurodollar contract is one-quarter of one basis point (0.0025 = $6.25 per contract) in the nearest expiring contract month, and one-half of one basis point (0.005 = $12.50 per contract) in all other contract months. Trading in Eurodollar futures is extensive, and the market for them tends to be very liquid. CME Eurodollar futures prices are determined by the markets forecast of the 3-month USD LIBOR interest rate expected to prevail on the settlement date. The settlement price of a contract is defined to be 100.00 minus the official British Bankers Association fixing of 3-month LIBOR on the contract settlement date. For example, if 3-month LIBOR sets at 5.00% on the contract settlement date, the contract settles at a price of 95.00.
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if at the close of business on that day, the contract price has risen to 95.01 (implying a LIBOR decrease to 4.99%), US$25 will be paid into the investor's margin account; or if at the close of business on that day, the contract price has fallen to 94.99 (implying a LIBOR increase to 5.01%), US$25 will be deducted from the investor's margin account.
On the settlement date, the settlement price is determined by the actual LIBOR fixing for that day rather than a market-determined contract price.
If the following day, the investor is able to lend money from the same start date at 5.01%, s/he would be able to earn US$1,000,000 5.01% 90 / 360 = US$12,525 of interest. Since the investor only is earning US$12,500 of interest, s/he has lost US$25 as a result of interest rate moves. On the other hand, if the following day, the investor is able to lend money from the same start date only at 4.99%, s/he would be able to earn only US$1,000,000 4.99% 90 / 360 = US$12,475 of interest. Since the investor is in fact earning US$12,500 of interest, s/he has gained US$25 as a result of interest rate moves. This demonstrates the similarity. However, the contract is also different from a loan in several important respects:
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In an actual loan, the US$25 per basis point is earned or lost at the end of the three-month loan, not up front. That means that the profit or loss per 0.01% change in interest rate as of the start date of the loan (i.e., its present value) is less than US$25. Moreover, the present value change per 0.01% change in interest rate is higher in low interest rate environments and lower in high interest rate environments. This is to say that an actual loan has convexity. A Eurodollar future pays US$25 per 0.01% change in interest rate no matter what the interest rate environment, which means it does not have convexity. This is one reason that Eurodollar futures are not a perfect proxy for expected interest rates. This difference can be adjusted for by reference to the implied volatility of options on Eurodollar futures. In an actual loan, the lender takes credit risk to a borrower. In Eurodollar futures, the principal of the loan is never disbursed, so the credit risk is only on the margin account balance. Moreover, even that risk is the risk of the clearinghouse, which is considerably lower than even unsecured single-A credit risk.
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Sweeps:
In United States Banking, Eurodollars are a popular option for what are known as "sweeps". By law, banks aren't allowed to pay interest on corporate checking accounts. To accommodate larger businesses, banks may automatically transfer, or sweep, funds from a corporation's checking account into an overnight investment option to effectively earn interest on those funds. Banks usually allow these funds to be swept either into money market mutual funds, or alternately they may be used for bank funding by transferring to an offshore branch of a bank.
Federal funds:
In the United States, federal funds are overnight borrowings by banks to maintain their bank reserves at the Federal Reserve. Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. Transactions in the federal funds market enable depository institutions with reserve balances in excess of reserve requirements to lend reserves to institutions with reserve deficiencies. These loans are usually made for one day only, that is, "overnight". The interest rate at which these deals are done is called the federal funds rate. Federal funds are not collateralized; like eurodollars, they are an unsecured interbank loan. Federal funds transactions neither increase nor decrease total bank reserves. Instead, they redistribute reserves and enable otherwise idle funds to yield a return. Banks may borrow these funds to avoid an overdraft (that is, the balance going below reserve requirement) of their reserve account, or in order to meet the reserves required to back their deposits. Federal funds are definitive money, meaning that they are available for immediate spending, while checks and many other forms of money must be cleared by banks and typically take several days before becoming available for spending. Participants in the federal funds market include commercial banks, savings and loan associations, government sponsored enterprises, branches of foreign banks in the United States, federal agencies, and securities firms. Many relatively small institutions that accumulate
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reserves in excess of their requirements lend reserves overnight to money center and large regional banks, as well as to foreign banks operating in the United States. Federal agencies also lend idle funds in the federal funds market.
Holder 1. China 2. Japan 3. United Kingdom 4. Oil Exporters 5. Brazil 6. Carib Bnkng Ctrs 7. Taiwan 8. Russia 9. Hong Kong 10. Switzerland 11. Luxembourg 12. Canada 13. Singapore 14. Germany
$US billion 1160.1 882.3 272.1 211.9 186.1 168.6 155.1 151.0 134.2 107.0 86.4 76.8 72.9 60.5
Luxembourg holds with approximately 500,000 inhabitants $172,800 per capita of U.S. Treasury securities. In comparison, Germany holds only $747 per capita
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Municipal bond:
A municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any other governmental entity (or group of governments) below the state level. Municipal bonds may be general obligations of the issuer or secured by specified revenues. In the United States, interest income received by holders of municipal bonds is often exempt from the federal income tax and from the income tax of the state in which they are issued, although municipal bonds issued for certain purposes may not be tax exempt. Unlike new issue stocks that are brought to market with price restrictions until the deal is sold, municipal bonds are free to trade at any time once they are purchased by the investor. Professional traders regularly trade and retrade the same bonds several times a week.
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ongoing operations and maintenance expenses, the purchase of singlefamily and multi-family mortgages, and the funding of student loans, among many other things. Because of the special tax-exempt status of most municipal bonds, investors usually accept lower interest payments than on other types of borrowing (assuming comparable risk). This makes the issuance of bonds an attractive source of financing to many municipal entities, as the borrowing rate available in the open market is frequently lower than what is available through other borrowing channels. Municipal bonds are one of several ways states, cities and counties can issue debt. Other mechanisms include certificates of participation and lease-buyback agreements. While these methods of borrowing differ in legal structure, they are similar to the municipal bonds described in this article.
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Bond measure:
A bond measure is an initiative to sell bonds for the purpose of acquiring funds for various public works projects, such as research, transportation infrastructure improvements, and others. These measures are put up for a vote in general elections and must be approved by a plurality or majority of voters, depending on the specific project in question. Such measures are very often used in the United States when other revenue sources, such as taxes, are limited or non-existent.
Treasury bills:
Treasury bills (or T-Bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity. Many regard Treasury bills as the least risky investment available to U.S. investors. Regular weekly T-Bills are commonly issued with maturity dates of 28 days (or 4 weeks, about a month), 91 days (or 13 weeks, about 3 months), 182 days (or 26 weeks, about 6 months), and 364 days (or 52 weeks, about 1 year). Treasury bills are sold by single-price auctions held weekly. Offering amounts for 13-week and 26-week bills are announced each Thursday for auction, usually at 11:30 a.m., on the following Monday and settlement, or issuance, on Thursday. Offering amounts for 4-week bills are announced on Monday for auction the next day, Tuesday, usually at 11:30 a.m., and issuance on Thursday. Offering amounts for 52-week bills are announced every fourth Thursday for auction the next Tuesday, usually at 11:30 am, and issuance on Thursday. Purchase orders at Treasury Direct must be entered before 11:00 on the Monday of the auction. The minimum purchase, effective April 7, 2008, is $100. (This amount formerly had been $1,000.) Mature T-bills are also redeemed on each Thursday. Banks and financial institutions, especially primary dealers, are the largest purchasers of T-bills. Like other securities, individual issues of T-bills are identified with a unique CUSIP number. The 13-week bill issued three months after a 26week bill is considered a re-opening of the 26-week bill and is given the same CUSIP number. The 4-week bill issued two months after that and
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maturing on the same day is also considered a re-opening of the 26-week bill and shares the same CUSIP number. For example, the 26-week bill issued on March 22, 2007, and maturing on September 20, 2007, has the same CUSIP number (912795A27) as the 13-week bill issued on June 21, 2007, and maturing on September 20, 2007, and as the 4-week bill issued on August 23, 2007 that matures on September 20, 2007. During periods when Treasury cash balances are particularly low, the Treasury may sell cash management bills (or CMBs). These are sold at a discount and by auction just like weekly Treasury bills. They differ in that they are irregular in amount, term (often less than 21 days), and day of the week for auction, issuance, and maturity. When CMBs mature on the same day as a regular weekly bill, usually Thursday, they are said to be on-cycle. The CMB is considered another reopening of the bill and has the same CUSIP. When CMBs mature on any other day, they are offcycle and have a different CUSIP number.
Treasury note:
Treasury notes (or T-Notes) mature in one to ten years. They have a coupon payment every six months, and are commonly issued with maturities dates between 1 to 10 years, with denominations of $1,000. In the basic transaction, one buys a "$1,000" T-Note for say, $950, collects interest over 10 years of say, 3% per year, which comes to $30 yearly, and at the end of the 10 years cashes it in for $1000. So, $950 over the course of 10 years becomes $1300.
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T-Notes and T-Bonds are quoted on the secondary market at percentage of par in thirty-seconds of a point (n/32 of a point, where n = 1,2,3,...). Thus, for example, a quote of 95:07 on a note indicates that it is trading at a discount: $952.19 (i.e., 95 + 7/32%) for a $1,000 bond. (Several different notations may be used for bond price quotes. The example of 95 and 7/32 points may be written as 95:07, or 95-07, or 95'07, or decimalized as 95.21875.) Other notation includes a +, which indicates 1/64 points and a third digit may be specified to represent 1/256 points. Examples include 95:07+ which equates to (95 + 7/32 + 1/64) and 95:073 which equates to (95 + 7/32 + 3/256). Notation such as 95:073+ is not typically used. The 10-year Treasury note has become the security most frequently quoted when discussing the performance of the U.S. government bond market and is used to convey the market's take on longer-term macroeconomic expectations.
Treasury bond:
Treasury bonds (T-Bonds, or the long bond) have the longest maturity, from twenty years to thirty years. They have a coupon payment every six months like T-Notes, and are commonly issued with maturity of thirty years. The secondary market is highly liquid, so the yield on the most recent T-Bond offering was commonly used as a proxy for long-term interest rates in general. This role has largely been taken over by the 10year note, as the size and frequency of long-term bond issues declined significantly in the 1990s and early 2000s. The U.S. Federal government suspended issuing the well-known 30-year Treasury bonds (often called long-bonds) for a four and a half year period starting October 31, 2001 and concluding February 2006. As the U.S. government used its budget surpluses to pay down the Federal debt in the late 1990s, the 10-year Treasury note began to replace the 30-year Treasury bond as the general, most-followed metric of the U.S. bond market. However, because of demand from pension funds and large, long-term institutional investors, along with a need to diversify the Treasury's liabilities - and also because the flatter yield curve meant that the opportunity cost of selling long-dated debt had dropped - the 30-year Treasury bond was re-introduced in February 2006 and is now issued
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quarterly. This brought the U.S. in line with Japan and European governments issuing longer-dated maturities amid growing global demand from pension funds.
TIPS:
Treasury Inflation-Protected Securities (or TIPS) are the inflationindexed bonds issued by the U.S. Treasury. The principal is adjusted to the Consumer Price Index (CPI), the commonly used measure of inflation. When the CPI rises, the principal adjusts upward. If the index falls, the principal adjusts downwards. The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal, thus protecting the holder against inflation. TIPS are currently offered in 5-year, 10-year and 30-year maturities.
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offering institutional money funds are BlackRock, Western Asset, Federated, Bank of America, Dreyfus, AIM and Evergreen (Wachovia).
Structure:
A forex swap consists of two legs:
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These two legs are executed simultaneously for the same quantity, and therefore offset each other. It is also common to trade forward-forward, where both transactions are for (different) forward dates.
Uses:
By far and away the most common use of FX swaps is for institutions to fund their foreign exchange balances. Once a foreign exchange transaction settles, the holder is left with a positive (or long) position in one currency, and a negative (or short) position in another. In order to collect or pay any overnight interest due on these foreign balances, at the end of every day institutions will close out any foreign balances and re-institute them for the following day. To do this they typically use tom-next swaps, buying (or selling) a foreign amount settling tomorrow, and then doing the opposite, selling (or buying) it back settling the day after. The interest collected or paid every night is referred to as the cost of carry. As currency traders know roughly how much holding a currency position will make or cost on a daily basis, specific trades are put on based on this; these are referred to as carry trades.
Pricing:
The relationship between spot and forward is as follows:
Where:
F = forward rate S = spot rate r1 = simple interest rate of the term currency r2 = simple interest rate of the base currency T = tenor (calculated according to the appropriate day count convention)
The forward points or swap points are quoted as the difference between forward and spot, F - S, and is expressed as the following:
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Where r1 and r2 are small. Thus, the absolute value of the swap points increases when the interest rate differential gets larger, and vice versa.
Conclusion
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The topic which was assign was Critically examine the features of various common money market instruments The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. 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, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." In the United States, federal, state and local governments all issue paper to meet funding needs. States and local governments issue municipal paper, while the US Treasury issues Treasury bills to fund the US public debt. These are some Common money market instruments with different features, Certificate of deposit, Repurchase agreement, Commercial paper, Eurodollar, Federal funds, Municipal bond, Treasury bills, Money market fund and Foreign exchange swap.
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Reference
Project report Critically examine the features of various common money market instruments www.slideshare.com http://www.google.com.pk http://en.wikipedia.org http://www.scribd.com/doc/24651033
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