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Key Money Market Instruments Outlined

Here is a list of key money market (financial market) instruments. These items are described within the context of a Canadian market.

The money market is a 1 trillion market (annual turnover) and a crucial component to help implement monetary policy by the Bank of Canada.

Types of financial instruments traded include:

– Government of Canada Treasury Bills (T-Bills)
*Note – Bank rate is upper end of operating band.

– Short-term government bonds (less than 3 years to maturity)
– Provincial and Municipal short-term notes and T-Bills
– Day-to-day loans, PRA’s, and SRA’s
– Note – Special PRA’s and Special SRA’s (repos and reverse repos)
– Purpose is to put downward/upward pressure on rates.
– Call and Short Loans (from chartered banks to securities dealers – at prime rate)
– Chartered Bank Deposites
– Term Notes
– Deposit Certificates (CD’s)
– Swapped Deposits (to us)
– Forward Contracts (like futures yet with private party transaction)
– Interbank funds
– Finance Paper (packages of instalment debt contracts held with customers)
– Corporate/Commercial Paper (30 day notes)
– Bankers’ Acceptances (30-90 days, bank assumes risk)
– Guaranteed Trust and Investment Certificates (GIC’s) (Better than normal accounting)
– Repurchase Aggreements (repos)
– Resale Agreements (Preverse Repos)

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