Money Market Instruments

Money market instruments provide investors with relatively safe and liquid investment options while allowing borrowers to access short-term financing, providing liquidity and stability.

These instruments include treasury bills, commercial paper, and certificates of deposit with a maturity of less than one year.

Treasury bills are issued by the government with a maturity of four to fifty-two weeks to raise funds for temporary cash flow needs and are considered the safest investment.

They are sold at a discount from their face value and pay interest at maturity.

Commercial paper is issued by large corporations with a maturity of one to nine months and are also sold at a discount from their face value.

They are unsecured, signifying it has no collateral backing it. However, it is considered a relatively safe investment because well-established and creditworthy companies usually issue it.

Certificates of deposit are issued by banks and credit unions with fixed maturities ranging from a few months to several years and offer higher interest rates. Usually, the longer the maturity period, the higher the interest rate.