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12 Cards in this Set
- Front
- Back
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Money Market Debt Characteristics
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* 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 |
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Federal Reserve Board's Open Market Operations Committee; FRB's OMOC
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* 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 |
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Treasury Bills
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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 |
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Repurchase Agreements
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Short term selling of securities (usually T-Bills) in order to improve short term liquidity
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Reverse Repo
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Occurs when Fed sell securities to a Dealer, this would take money out o the system; therefore tightening the money supply.
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Federal Funds
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Excess amount of cash on deposit a bank has that's required by FRB
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Federal Funds Rate
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Rate that is charged to borrow money
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Effective Federal Funds Rate
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Daily average of the interest rates many banks are charging for Fed Fund loans.
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Banker's Acceptances
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* 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. |
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Negotiable Certificates of Deposit
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* 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 |
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Commercial Paper
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* 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 |
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Euro dollars
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* 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 |
