MONEY MARKET AND MONEY MARKET INSTRUMENTS

MONEY MARKET
Money market is known as a financial market for raising and investing short-term funds. Short- term there means anything from one day to one year while medium term is between one year and three years. The money market is further divided into primary and secondary markets. The primary market is for new securities, while the secondary market is a market for existing or second- hand securities.

MONEY MARKET INSTRUMENTS
A money market instrument refers to those securities that are traded on money market.
They include:

 TREASURING BILLS(TBS)
The are IOUS issued by the federal government of tenors ranging from two days of 91 days to regulate money supply in the economy.
TBS are sold by the government when it wants to reduce money supply and bought when it wants to increase money supply. Treasuring bills are issued at a discount and redeemed at par.

 TREASURING CERTIFICATE
These are securities issued by the central bank of a country from time to time on behalf of the federal government. They usually carry a tenor of 12 months, but are nut like treasury bills.

 CENTRAL BANK CERTIFCIATE
These are financial borrowing instruments designed and introduced by the central bank to mop up the excess liquidity in the banking system as a result of government injection of funds into the system through the usual budgetary allocation to the various tiers of government. The present maturity periods for the current issues are for 180 and 360 days.

 TIME DEPOSIT
Time deposit is an amount deposit with a bank and represents a direct lending by an investor to the bank.
These are amount invested by government, individuals and corporate bodies for the period of time, which may be on call or fixed (ie giving notice for withdrawal) they are all interest bearing liability of the borrowing financial institution.

 BANKERS ACCEPTANCES
These are bill of exchange or time draft which are drawn on bank and have been accepted by the bank indicating an unconditional promise to honor such instruments at maturity. By accepting a bill, the bank puts its guarantee to pay the bill to the holder at the maturity date. Though it is short- term in nature usually with a 90 days tenor.

 COMMERCIAL PAPERS
These are promissory notes issued by blue-chip companies to borrow money by committing to repay a certain amount on maturity. These are issued at discounts and are redeemed at par. CP contract is usually between the issuer (borrowers) and the investor (under) with the bank or finical house acting as a marketing agent. They usually of 90 days tenor. If the marketing agent is not obliged to pay the investor, if the issuer does not have funds to repay on maturity. The market agent has no obligation under the CP arrangement, effort are made to ensure that the investor is repaid his principal because defaults are bad for the reputation of the marketing agent.

 NEGOTIABLE CERTIFICATE OF DEPOSIT (NCD)
These offer flexibility to an investor than a straight forward bank deposit. In the case of NCD investment, the bank accepts a deposit, and in turn issue a certificate which may be resold in the market should the holder need his funds before the maturity date of the certificate.