Types of Money Market Instru

• Commercial papers are short-term, unsecured debt obligations with a maturity of 3 to 9 months, that are issued by financial institutions & large corporations as an alternative to expensive methods of funding not supported by anything other than the issuer’s promise to repay the face value at maturity.
• Commercial paper is also known as “T-Bills”, are short-term investments with a maturity of one year or less, issued by the Philippine government through the Bureau of the Treasury.
• Treasury bills are sold at a discount and are safe and practically risk-free investments since you are investing in the government, hence repayment is assured.
• Local government notes, commonly known as “municipal notes”, are short-term debt issued by the state and local governments to finance capital expenditures like construction projects, or to cover revenue shortfalls.
• Time deposits are interest-bearing bank accounts that have a date of maturity not less than 30 days, such as a certificate of deposit.
• The money must remain in the account for a specified time to receive the interest in full; the longer the term, the higher the interest rate & return that the depositor receives.
• Bankers’ acceptances are promissory notes issued by a non-financial firm to a bank in return for a loan, where the bank resells the note in the money market at a discount and guarantees payment.
• Interbank loans are loans extended from one bank to another with which it has no affiliation.
• The second transaction in a repo is unwound as the securities dealer buys back the securities from the investor.
• Trading is considered as low risk as they involve highly liquid and short instruments that are open and backed by the government or high-quality issuers.
• Repurchase agreements, also known as repos, are a combination of two transactions: the first transaction involves a securities dealer, such as a bank, selling securities it owns to an investor, agreeing to repurchase the securities at a specified higher price at a future date.
• The pros of trading include low returns, high liquidity, and inflation risk.
• Brokers and banks facilitate money market trading and act as intermediaries, connecting buyers with sellers.
• The cons of trading include low returns, liquidity, inflation risk, stability, and market risk.
• Trading is not suitable for investors seeking substantial capital appreciation or growth, as it focuses on preserving capital.
• Government agency notes are national government agencies and government owned or controlled corporations that are heavy borrowers in the money market.
• Trading occurs when both parties sign contracts, either with one another or with a central clearing house, committing themselves to completing transactions on the terms agreed.
• Trading is the buying and selling of stocks, bonds, commodities, currencies, or other financial securities for a short time to earn profit.
• Trading offers relatively predictable returns, making it suitable for short-term financial planning.
• International agency paper is issued by the World Bank, Asian Development Bank and other organizations owned by members of the government.
• Government agency notes serve to keep the markets highly liquid, which in turn ensures that there will be a constant supply of buyers for new money.