Financial Markets, Instruments, and Market Makers

Money Market Instruments

• Commercial paper
• Short-term debt instrument issued by corporations
• Supported by backup line of bank credit
• Bankers’ Acceptances
• Instruments created in course of financing international trade

Money Market Instruments

• Repurchase Agreements
• Short-term agreements in which seller
• Sells government security to buyer
• Agrees to buy government security back on later date at higher price
• Federal Funds
• Overnight loans between depository institutions of their deposits at the Fed
• Eurodollars
• Dollar-denominated deposits held in banks outside the United States

• Exhibit 3–2
• The Money Market

• Exhibit 3–3
• Bankers’ Acceptances

• Source: Adapted from Ann-Marie Meulendyke, U.S. Monetary Policy and Financial Markets (New York: Federal Reserve Bank of New York, 1989), p. 80.