Money market transactions involve short-term instruments with a maturity of one year or less. Money market securities are very liquid, and are considered very safe. As a result, they offer a lower return than other securities.
· T-bills are short-term government securities that mature in one year or less from their issue date.
· T-bills are considered to be one of the safest investments, and are often referred to as “riskless.”
· A certificate of deposit (CD) is a time deposit with a bank. CDs are safe, but the returns aren’t great, and your money is tied up for the length of the CD.
· Banker’s acceptances are negotiable time drafts for financing transactions in goods. BAs are used frequently in international trade and are generally only available to individuals through money market funds.
· Eurodollars are U.S. dollar-denominated deposit at banks outside of the United States. The average Eurodollar deposit is very large. The only way for individuals to invest in this market is indirectly through a money market fund.
· Repurchase agreements (repos) are a form of overnight borrowing backed by government securities.