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Money market instruments are financial instruments that are traded in the secondary market. The instruments include short-term debt securities, bills, and bonds.
There are three basic types of money market instruments: government securities, corporate securities, and bank loans. The government securities include treasury bills, treasury notes, and U.S. savings bonds; the corporate securities include preferred stock and common stock; and the bank loans include commercial paper and bank deposits.
The money market is a market for short-term debt instruments. It is also referred to as the capital market or the capital structure of an economy.
The money market consists of three types of instruments:
1) short-term debt securities,
2) bills, and
3) repurchase agreements.
The instruments used in the money market are short-term securities. These are typically short-term debt instruments. The instruments in this market can be classified into two types:
1) Government securities: These are the most common securities that banks and other financial institutions hold to meet their reserve requirements.
2) Commercial paper: This is a promissory note issued by companies to their lenders and investors on a temporary basis, usually for less than one year.
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