LESSON-2-FINANCIAL-MARKETS.pdf

MONEY MARKETS MGT 103  OBJECTIVES: DESCRIBE WHAT MONEY MARKET IS EXPLAIN HOW MONEY MARKET WORKS IDENTIFY WHO THE USERS OF MONEY MARKET ARE ENUMERATE AND DESCRIBE THE FEATURES OF MONEY MARKET INSTRUMENTS  MONEY MARKET refers to the network of corporations, financial in...

MONEY MARKETS MGT 103  OBJECTIVES: DESCRIBE WHAT MONEY MARKET IS EXPLAIN HOW MONEY MARKET WORKS IDENTIFY WHO THE USERS OF MONEY MARKET ARE ENUMERATE AND DESCRIBE THE FEATURES OF MONEY MARKET INSTRUMENTS  MONEY MARKET refers to the network of corporations, financial institutions, investors and governments which deal with the flow of short- term capital.  TYPES OF MONEY-MARKET INSTRUMENTS  COMMERCIAL PAPER It is a short-term debt obligation of a private- sector firm or a government-sponsored corporation. Only companies with good credit ratings issue commercial paper because investors are reluctant to bring the debt of financially compromised companies.  BANKERS’ ACCEPTANCES Bankers’ acceptances were the main way for firms to raise short-term funds in the money markets. An acceptance is a promissory note issued by a non-financial firm to a bank in return for a loan.  TREASURY BILLS Treasury bills, often referred to as T-bills, are securities with a maturity of one year or less, issued by national governments. Treasury bill issued by a government in its own currency are generally considered the safest of all possible investments in that currency.  GOVERNMENT AGENCY NOTES National government agencies and government- sponsored corporations are heavy borrowers in the money markets in many securities. These include entities such as development banks, housing finance corporations, education lending agencies and agricultural finance agencies.  LOCAL GOVERNMENT NOTES Local government notes are issued by, provincial or local governments, and by agencies of these governments such as schools authorities and transport commissions. The ability of governments at this level to issue money-market securities varies greatly from country to country.  INTERBANK LOANS Loans extended from one bank to another with which it has no affiliation are called interbank loans. Many of these loans are across international boundaries and are used by the borrowing institution to re-lend to its own customers.  TIME DEPOSITS Time deposits, another name for certificates of deposits or CDs, are interest-bearing bank deposits that cannot be withdrawn without penalty before a specified date.  REPOS Repurchase agreements known as repos, play a critical role in the money markets. They serve to keep the markets highly liquid, which in turn ensures that there will be constant supply of buyers for new money-market instruments. THANK YOU FOR LISTENING!