LAWRENCE BRIAN R.

LABASAN
CBE Instructor
 Money market is a component of
financial markets for assets involved in
short-term debt instruments. They consist
of a network of institutions and facilities
for trading debt securities with a maturity
of one year or less.

Money market is a collective name

given to various firms and institutions that
deal in the various grades of the near money.
 A market for short-term financial
assets that are close substitute for money,
facilitates the exchange of money in primary
and secondary market.
 It is a market purely of short-term funds
or financial assets called near money.

 It deals with financial assets having a

maturity period less than one year only.

 Transaction have to be conducted without

the help of brokers.
 Financing trade
 Financing industry
 Profitable Investment
 Self-sufficiency of commercial bank
 Help to Central bank
 Money market instruments are issued
by corporations and government units to
obtain short-term funds.
 Treasury bills
 Banker’s acceptances
 Negotiable certificate of deposit
 Commercial paper
 Repurchase agreements
 Unit trusts
 Money market consist of a number of
submarkets which collectively constitute
the money market. They are:

 Call Money Market

 Commercial bills market/Discount
market
 Acceptance Market
 Treasury Bill Market
 are the most marketable of all money
market instruments

 they are issued with three month, six

month and one year maturities

 Treasury bills are purchased for a price

that is less than their par (face) value;
when they mature, the government pays
the holder the full par value.
 are short-term and risk free investments

According to the T-bills issued by the

National government, the average rate of
the T-bills are the following:
91-day T-Bills 182-day T-Bills 364-day T-bills

0.01%- 0.09%-1.4% 0.307%-

1.4580% 1.7500%
 Banker’s acceptances are bank drafts
issued by banks to help traders and other
customers raise funds to pay for current
expenditures using bank credit.

 Acceptances are traded at discounts from

face value at the secondary market
 BA acts as a negotiable time draft for
financing imports, exports or other
transactions in goods.

 This is specially useful when the credit

worthiness of a foreign trade partner is
unknown.

It is like a post-dated check.

 An NCD is a receipt issued by a commercial
bank for the deposit of money.
 It is a time deposit with a definite maturity
date (up to 1 year) and a definite annual
interest.
 The bank pays interest and principal to the
depositor at the end of the fixed term of the
NCD.
 Like most time deposit, funds can not be
withdrawn without paying a penalty.
 NCD have a minimum value of $100,000
 CP is an unsecured loan issued by a
corporation typically financing accounts
receivable, inventories and other short-
term needs.
CP’s are marketable securities issued by
companies with high credit rating.
 They have low risk of default and can
have maturities ranging from 30-270 days.
• REPO is a form of overnight borrowing
and is used by those who deal in
government securities.
• they are usually very short term
repurchase agreements, from overnight to
30 days.
• The short-term maturity and government
backing usually mean that repos provide
lenders with extremely low risk.
 Money market mutual fund are
offered by investment companies. They are
investment pools that buy safe, short-term
securities such as treasury bills, certificate
of deposit , and commercial papers.
 A Capital market is a financial market
in which long-term debt or equity-backed
securities are bought and sold.
Capital markets a defined as markets
in which money is provided for periods
longer than 1 year.
Capital markets channel the wealth
of savers to those who can put it to long
term productive use.
 Ordinary shares

 Preference shares

 Bonds
 Common stocks is a security that
represents ownership in a corporation.
Holders of a common stock exercise control
by electing a board of directors and voting
on corporate policy.
Common stocks, also known as equity
securities, represent ownership shares in a
corporation. Each share of common stocks
entitles its owners to one vote of any
matters of corporate governance.
 The two most important
characteristics of common stock as an
investment are its residual claim and its
limited liability features.
 Preferred stocks has features similar
to both equity and debt. Like a bond, it
promises to pay to its holder a fixed stream
of income each year.
A preferred stock is a class of
ownership in a corporation that has a
higher claim on its assets and earnings than
a common stock. Preferred shares generally
have a dividend that must be paid out before
dividends to common shareholders.
 A Bond is a debt investment in which
an investor loans money to an entity,
typically corporate or governmental which
borrows the funds for a defined period of
time at a variable or fixed interest rate.
Characteristics of bonds
 Face value
 Coupon rate
 Coupon date
 Maturity
 Issue date
Types of bonds
 Fixed rate bonds
 Zero coupon bonds
 Convertible bonds
 Floating rate bonds
 Straight bonds
 Income bonds
• OFFERS FOR SALE
In a capital market, the company sells
the entire issue of shares to an issue house
or merchant banker at an agreed price,
which is normally below the par value. The
shares are then resold by the issue house or
merchant banker to public.
• Private Placing/ Private Placement
The capital issue is sold directly to a
small group of investors like insurance
companies, banks, mutual funds, few
private investors.
• Sale by Tender
Sale by tender is like a silent auction.
The capital issue is marketed for sale with
or without a guide price and there is a
deadline for all offers.
 An initial public offering (IPO) is the
first time that the stock of a private
company is offered to the public. IPOs are
often issued by smaller, younger companies
seeking capital to expand, but they can also
be done by large privately owned companies
looking to become publicly traded.
• Right Issue
In capital market, rights issue means
selling securities in primary market by
issuing shares to the existing shareholders.
 Organized securities markets/
exchange markets is where tradable
securities, commodities, foreign exchange
are sold and bought.
 (book) Elements of Finance by Norma Dy
Lopez-Mariano Ph.D.
(book) Essentials of Investment 3rd
Edition by Irwin McGraw-Hill
 Investopedia.com
 www.treasury.gov.ph
 wikipedia
 businessdictionary.com
THANK YOU FOR LISTENING
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