What are examples of money market instruments?


Quick Answer

Examples of money markets include certificates of deposit, treasury bills, commercial paper and bankers' acceptance, according to BusinessDictionary.com. Money market instruments provide governments and corporations short-term access to capital, explains Investopedia.

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Full Answer

A banker's acceptance is a bank's endorsement of a bill of exchange from the buyer's bank, notes BusinessDictionary.com. Banks accept the endorsement if the buyer has enough financial credibility to make the payment and if an endorsing bank backs the maturity date.

U.S. treasury securities also come in the form of notes and bonds, explains Kay Miranda for the Houston Chronicle. Many investors look to notes and bills for short-term investing. Price instability can be a problem because the money market fund needs liquidity in the market. However, maintaining debt in the short-term minimizes the risk of the market falling below $1 per share.

Certificates of deposits, or CDs, are certificates that come with interest payments, according to Investopedia. For instance, CD buyers can purchase a set amount for the sake of the compound interest that accrues annually.

Commercial paper is a quick way to get access to money without having to put up collateral or file through the Securities and Exchange Commission, claims Miranda. However, the paper needs to mature within a nine-month period to avoid SEC regulation. There is no interest on the loan, and the money is offered at a discount, but the borrowing institution is required to repay the balance in full at the non-discounted price.

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