BUSI 3410U Lecture Notes - Lecture 3: U.S. Route 360, Money Market, United States Treasury Security
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Mo(cid:374)e(cid:455) ma(cid:396)ket mo(cid:374)e(cid:455) (cid:894)(cid:272)u(cid:396)(cid:396)e(cid:374)(cid:272)(cid:455)(cid:895) is (cid:374)ot a(cid:272)tuall(cid:455) t(cid:396)aded i(cid:374) the (cid:373)o(cid:374)e(cid:455) (cid:373)a(cid:396)ket. Securities in the money market are short term with high liquidity. They mature in one year or less from their issue date. Money market securities are usually sold in large denominations (,000,000 or more) Banking industry should handle the needs for short-term loans and accept short term deposits. Banks also have information on the credit-worthiness of participants. Banks do mediate between savers and borrowers; heavily regulated: creates distinct cost advantages for money markets over banks. 1934 macmillan report recommended establishing: central bank, canadian money market, treasury bill auctions. Participants in money markets: go(cid:448)(cid:859)t of ca(cid:374)ada, boc, co(cid:373)(cid:373)e(cid:396)(cid:272)ial ba(cid:374)ks, businesses, investment and securities firms. Discounting; yield (k) or interest rate (us 360 days, canada is 365 or exact) = (f p)/p ; for specific notes (different maturity: k times (365/maturity day)
