Money Market Investments Flashcards
What are Certificates of deposit?
Receipts from banks for fixed term deposits placed with them
Deposits pay fixed interest (up to 3 months)
Similar to term account but often less interest as more liquid
Interest rates dependent on credit rating of bank and market rates
What are Treasury Bills?
Issued by Debt Management Office (DMO) (government) to finance daily cash flow
Weekly auctions
Term - less than 12 months (91 days common) (1,3, 6 months)
No interest paid - issued at discount to redemption value
Min investment of £500K nominal stock
Government backed and highly liquid
What are Commercial Bills/Commercial Paper?
Issue by Companies - similar to Treasury Bills
Short term negotiable debt instruments
Issued at discount
Unsecure
Higher yields because of increased default risk and lower liquidity
