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15 Cards in this Set
- Front
- Back
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Money market
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ST debt instruments w maturities of 12m or less
-Tbills (most liquid) -Bankers acceptance (least liquid) |
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Capital market
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LT debt and equity instruments
-stock -bonds |
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Federal funds
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Excess funds deposited by BANKS at the FR banks, usually funds which are in excess of reserve requirements.Banks can:
1.Lend to each other on an overnight basis 2.Make same day credit and debit transactions,which are called fed wires -Pay for purchases of govt sec when performing open market operations |
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Federal funds rate
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Int rate charged by BANKS w excess reserves to banks needing overnight loans to meet reserve requirements
-Most volatile -Leading indicator of int rates -Decline will expand the $ supply -Increase will shrink the $ supply |
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'Effective' federal funds
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Daily average rate of interest costs of Federal Funds transactions thruout the country
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Repurchase agreements(REPOS)
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ST mm instruments which are generally overnight transactions but can have maturities of up to 3 months. It is an AGREEMENT to repurchase US govt securities at a fixed price
1.Most buyers are corporations 2.Difference between the purchase and repurchase prices is interest 3.Traded in denominations of $1,000,000 4.Int paid is competetive w the fed funds rate 5.Repo rates are negotiated between two parties 6.Has an ACTIVE 2ndary mkt 7.Not riskless 8.Some are issued as callable |
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Bankers acceptances
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1.Used to finance foreign trade
2.Also called two name paper 3.Issued at a discount so that exporters can receive immediate payment 4.Mature within 9m 5.Traded OTC primarily by institutional inv 6.Dealers profit from the spread between the price at which they are bought and sold(discount) |
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Commercial paper
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1.Max maturity of 270 days
2.Unsecured promissory note of corporations 3.Paid w incoming A/R 4.Issued at a discount 5.Not guaranteed by FDIC 6.Not callable 7.Has a very liquid and active 2ndary mkt 8.Exempt from SEC reg |
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Eurodollars
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US dollars that have been deposited w banks outside the US and used to settle intl transactions
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Eurodollar bonds
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1.Int and princ made in US $
2.Sold at rates LOWER than US int rates bc there is less regulation 3.Offer diversification 4.SEC does not have jurisdiction |
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The interbank market
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UNREGULATED, decentralized global market which trades currencies and debt obligations
-trading is conducted un units of $1-$5m -done between institutions only Risks: 1.economic changes in countries whose currencies are being traded 2.changes in govt policies 3.no last sale info 4.24hr mkt |
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Individual CDs
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-Issued in denominations of $100-$100,000
-Int is accrued and paid at maturity -Not liquid |
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Negotiable CDs
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AKA Jumbo CDs/Brokered CDs
-$100,000 min deposits -Trade 'PLUS INTEREST' which is paid to the seller on SETTLEMENT date -Have a liquid 2ndary mkt -Can be issued as callable -FDIC insured |
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Eurodollar CDs
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-Int a princ are paid in US $
-Not a very active 2ndary mkt |
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Passbook savings account interest rate
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-Rates charged on savings accounts
-Changed the least -Least sensitive to changes in int rates |
