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The money market is a section of the fixed income market. It is a part of the global financial market, and is used for short-term cash solutions, often by governments and large institutions. It is considered to be low risk (safe) in relation to other options such as the stock market.
Money market securities frequently mature in under a year, and the normal time length that a security is had is at or below thirteen months. They are considered quite liquid as assets. Due to the relative safety, liquidity, and other factors, money market investments do not have as high return rates as do some other investments.
Some of the more common financial instruments traded in the money market include:
Banker's acceptance
Certificate of deposit (CD)
Commercial paper
Eurodollar deposit
Federal agency short-term securities
Federal funds (funds maintained by U.S. Federal Reserve)
Foreign currency exchange swap
Money funds (money market mutual funds, money market funds)
Municipal bond (municipal note, municipal paper)
Repurchase agreement (RP, repo)
Treasury bill (T-bill)
For an individual, the easiest way to access the money market may be through Treasury bills, money market mutual funds, or a money market bank account. Treasury bills may be purchased directly by the investor. Types such as money market mutual funds are acquired through an institution which collects funds from numerous investors to purchase the securities for them.
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