《金融市场与机构 Jeff Madura》ch06.pptVIP

6 Money Markets Chapter Objectives Provide a background on money market securities Explain how institutional investors use money markets Explain the globalization of money markets Money Market Securities Maturity of a year or less Debt securities issued by corporations and governments that need short-term funds Large primary market focus Purchased by corporations and financial institutions Secondary market for securities Money Market Securities Treasury Bills Commercial paper Negotiable certificates of deposits Repurchase agreements Federal funds Banker’s acceptances Money Market Securities Treasury bills Issued to meet the short-term needs of the U.S. government Attractive to investors Minimal default risk—backed by Federal Government Excellent liquidity for investors Short-term maturity Very good secondary market Money Market Securities Treasury bill auction (fill bids in amount determined by Treasury borrowing needs) Bid process used to sell T-bills Bids submitted to Federal Reserve banks by the deadline Bid process Accepts highest bids Accepts bids until Treasury needs generated Money Market Securities Treasury bill auction—noncompetitive bids ($1 million limit) May be used to make sure bid is accepted Price is the weighted average of the accepted competitive bids Investors do not know the price in advance so they submit check for full par value After the auction, investor receives check from the Treasury covering the difference between par and the actual price Money Market Securities Estimating T-bill yield No coupon payments Par or face value received at maturity Yield at issue is the difference between the selling price and par or face value adjusted for time If sold prior to maturity in secondary market Yield based on the difference between price paid for T-bill and selling price adjusted for time Money Market Securities Calculating T-Bill Annualized Yield Money Market Securities T-bill yield for a newly issued security Money Market Securit