Investments, tenth edition

 Figure 2.2 

The spread between 3-month CD and Treasury bill rates   

the TED spread, the difference between the LIBOR rate and Treasury bills, also peaked 

during periods of financial stress.   

 Money market funds are mutual funds that invest in money market instruments and 

have become major sources of funding to that sector. The nearby box discusses the fallout 

of the credit crisis of 2008 on those funds.    

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6/18/13   7:41 PM

6/18/13   7:41 PM

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  The bond market is composed of longer term borrowing or debt instruments than those 

that trade in the money market. This market includes Treasury notes and bonds, corporate 

bonds, municipal bonds, mortgage securities, and federal agency debt. 

 These instruments are sometimes said to comprise the  fixed-income capital market,  

because most of them promise either a fixed stream of income or a stream of income that 

is determined according to a specific formula. In practice, these formulas can result in a 

flow of income that is far from fixed. Therefore, the term  fixed income  is probably not 

fully appropriate. It is simpler and more straightforward to call these securities either debt 

instruments or bonds.