Money Market
The market for short-term, highly liquid debt used to park or borrow cash.
The money market trades short-term, highly liquid debt and sets short-term interest rates.
The money market is where short-term, highly liquid debt such as Treasury bills and bank deposits are traded. It is where institutions park cash overnight and where short-term interest rates are set. Its rates feed directly into the currency and bond markets.
How It Works
- Treasury bills and deposits trade there
- It sets overnight and short rates
- Its rates feed the currency market
Trading Tips
Watch money market rates for rate expectations
Read short rates as the cost of holding cash
Use them to gauge central bank policy lean
Money Market Example
Say your broker sweeps idle cash into money-market funds earning near policy rates. A $50,000 balance idling through a rate-hike year quietly collects thousands while pure cash accounts earn nothing. Same money, different parking.
How Traders Use Money Market
Park trading reserves where short rates pay you, not where brokers profit from your idleness. Compare sweep rates annually. The gap compounds like a negative edge in reverse.
Related Terms
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