Money markets

‘Money markets’ is a generic term covering the vast market for short-term cash loans and deposits organised between institutions such as banks, companies and even the government plus the market for tradable securities that have a life of less than 12 months.

Cash is lent and borrowed at ‘money market rates’ which vary both by currency and also according to time. So, for example, the rate earned on a one-month US dollar deposit will naturally not be the same as that available on a three-month yen deposit.

Then there are ‘money market instruments’ which create liquidity. One example is Treasury bills, which are IOUs which enable the Treasury to borrow and lend funds over periods ranging up to a year.

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