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12 Cards in this Set

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Money Market Debt Characteristics
* Short term debt maturing in one year or less

* Trades in large amounts ($1 MIL or above)

* Traded between institutions

* Issued @ a discount to par

* Participants: FRB, banks, brokerage frims & large corps
Federal Reserve Board's Open Market Operations Committee; FRB's OMOC
* FRB controls the money supply; treasury dept.

* Buying & selling of money market instruments w/Gov't Securities dealers (Banks & Brokerage Firms)

* OMOC = First line of defense against inflation

* When Fed BUYS securities, it's giving the dealers money which will raise the available credit to the public, INCREASING the money supply.

*When Fed SELLS securities to delaers, they're takign money from banks which will decrease the available credit to the public, DECREASING money supply.

* Only safest money market instruments are eligible for OMOC trading
Treasury Bills
US Gov't debt w/original maturities of 1 year or less

*Money Market Security = US Gov't debt maturing in less than 1 year
Repurchase Agreements
Short term selling of securities (usually T-Bills) in order to improve short term liquidity
Reverse Repo
Occurs when Fed sell securities to a Dealer, this would take money out o the system; therefore tightening the money supply.
Federal Funds
Excess amount of cash on deposit a bank has that's required by FRB
Federal Funds Rate
Rate that is charged to borrow money
Effective Federal Funds Rate
Daily average of the interest rates many banks are charging for Fed Fund loans.
Banker's Acceptances
* Used to facilitate foreign trade

* Assurancesthat the funds to pay for the goods will be available upon delivery

* Actively traded

* Prime BAs = Bearer securities which are held to maturity & have maturities of 270 days.
Negotiable Certificates of Deposit
* Issued by banks in exchange for time deposits

* Min. denom. = $100,000

* Min. maturity is 7 days, non-callable

* Issuer pays par plus accrued interest upon maturity

* Jumbo CD is denom of $1 Mil or more
Commercial Paper
* Short term unsecured corp debt maturing in 270 days or less

* Most sold @ discount, but some is interest bearing

* Denominations start @ $100,000

* Directly Placed = Issuer sells directly to public

* Dealer Placed = Issuer sells to dealer, who then sells to public

* NOT issued by commercial banks
Euro dollars
* Large deposits of US dollars held in banks outside the US

* Foreign banks trade these deposits in a similar manner as US banks trade Fed Funds

* Can be loaned for long periods