A Q U I C K I N F O R M AT I O N G U I D E

THE MONEY
MARKETS

PRESENTED BY GROUP 1
Agenda
K E Y TO P I C S D I S C U S S E D I N
T H I S P R E S E N TAT I O N

• The Money Markets Defined

• The Purpose of the Money Markets
• Who Participates in the Money Markets?
• Money Market Instruments
• Comparing Money Market Securities
Money Market Participants
U.S. Treasury Department
• Sells U.S. Treasury securities to fund the national debt

Federal Reserve System

• Buys and sells U.S. Treasury securities as its primary
method of controlling interest rates

Commercial banks
• Buy U.S. Treasury securities; sell certificates of
deposit and make short-term loans; offer individual
investors accounts that invest in money market
securities
Businesses
• Buy and sell various short-term securities as a regular part of
their cash management

Investment and Security Firms:

Investment companies (brokerage firms)
Finance companies (commercial leasing companies)

Insurance companies (property and casualty insurance

companies)

Pension funds
Individuals
• Buy money market mutual funds

Money market mutual funds

• Allow small investors to participate in the money
market by aggregating their funds to invest in large-
denomination money market securities
Money Market Instruments
• Are financial instruments which are issued
with a maturity of one year or less. It also
provides market for investors to earn a
return on liquid assets, access to these funds
for borrowers in need of short-term liquidity,
and a tool for the Fed to implement
monetary policy.
 Treasury Bill Auction
• T-bills are auctioned to the dealers every week and the treasury
announces how many and what kind of treasury bills it will offer for sale.
• The treasury accepts the bids offering the highest price.
• The treasury accepts competitive bids in ascending order of yield until
the accepted the bids reach the offering amount.
• The treasury may accept both competitive and non-competitive bids, and
the price everyone pays is the highest yield paid to any accepted bid.
• The treasury permits noncompetitive bidding and accepts all
noncompetitive bids as an alternative to the competitive bidding
procedure.
• Thus, noncompetitive bidders pay the same price paid by competitive
bidders.
 ICE BREAKER
Are financial instruments which are issued with a maturity
of one year or less. It also provides market for investors to
earn a return on liquid assets, access to these funds for
borrowers in need of short-term liquidity, and a tool for
the Fed to implement monetary policy.

_O_EY M__K_T I_ST_U_EN_S

 ICE BREAKER
Are financial instruments which are issued with a maturity
of one year or less. It also provides market for investors to
earn a return on liquid assets, access to these funds for
borrowers in need of short-term liquidity, and a tool for
the Fed to implement monetary policy.

MONEY MARKET INSTRUMENTS

 ICE BREAKER
Most marketable money market securities.

T_EA_U__ _IL_S
 ICE BREAKER
Most marketable money market securities.

TREASURY BILLS
 ICE BREAKER
The market of treasury bill is extremely
____ & ____.

D__P & _IQ_ID

 ICE BREAKER
The market of treasury bill is extremely
____ & ____.

DEE P & LIQUID

 ICE BREAKER
Short-term funds transferred between financial
institutions, usually for a period of one day.

F_ _ E R _ L _U_D_
 ICE BREAKER
Short-term funds transferred between financial
institutions, usually for a period of one day.

FEDERAL FUNDS
 ICE BREAKER
A bank issued security that documents deposit and
specifies the interest rate and the maturity date.

N_G_T__BL_ CD
 ICE BREAKER
A bank issued security that documents deposit and
specifies the interest rate and the maturity date.

NEGOTIABLE CD
 ICE BREAKER
Buys and sells U.S. Treasury securities as its
primary method of controlling interest rates.

F _ _ E R _ L _ E S _ R _ E S _ _ T _M
 ICE BREAKER
Buys and sells U.S. Treasury securities as its
primary method of controlling interest rates.

FEDE RAL RESERVE SYSTEM

 ICE BREAKER
Allow small investors to participate in the money
market by aggregating their funds to invest in
large-denomination money market securities

M_N__ MA_KET _U_UAL F__DS

 ICE BREAKER
Allow small investors to participate in the money
market by aggregating their funds to invest in
large-denomination money market securities

MONEY MARKET MUTUAL FUNDS