The money market refers to the market for short-term, high quality debt securities issued by government and corporate borrowers. Maturities can range from overnight to up to a year.
The money market creates liquidity for these borrowers to fund their short-term cash flow needs.
Common money market instruments include Treasury bills (T-bills), certificates of deposit (CDs), commercial paper, banker’s acceptances, eurodollars and repurchase agreements (repos) among others.
The money market is best known as a place for large institutions and governments to manage their short-term cash needs. However, individual investors have access to the market through a variety of different securities. In this tutorial, we’ll cover various types of money market securities and how they can work in your portfolio.