These specialized financial marketplaces facilitate the trading of highly liquid, short-term debt instruments with maturities typically of one year or less.
When you participate in money markets, you're essentially lending money for brief periods in exchange for security, liquidity, and modest returns.
Short-term debt securities issued by national governments, considered among the safest money market instruments.
Issuers
National governments
Typical Maturities
4 weeks to 52 weeks
Risk Level The relative risk of loss of principal compared to other money market instruments.
Very low
Liquidity
Extremely high
Tax Benefits Potential tax advantages from holding this type of instrument.
Taxable at federal level
Yield Range (2023) The typical range of annual returns for this type of instrument in 2023.
4.8% - 5.4%
Notable Examples
US Treasuries, German Bunds
Best For
Conservative investors seeking principal safety
Market Size
Largest segment of money markets
Key Feature: Benchmark for risk-free rate, no coupon (discount basis)
Did you know? Treasury bills are sold at a discount to their face value and do not pay interest before maturity. The return is the difference between the purchase price and face value.
Unsecured promissory notes issued by large corporations to meet short-term financing needs.
Issuers
Large corporations
Typical Maturities
1 to 270 days
Risk Level The relative risk of loss of principal compared to other money market instruments.
Low to moderate
Liquidity
High for major issuers
Tax Benefits Potential tax advantages from holding this type of instrument.
Fully taxable
Yield Range (2023) The typical range of annual returns for this type of instrument in 2023.
5.2% - 5.8%
Notable Examples
Apple Inc., Johnson & Johnson
Best For
Investors seeking higher yields than T-bills
Market Size
Major component of corporate funding
Key Feature: Unsecured, issued at discount
Did you know? Commercial paper helped finance the growth of major companies like General Motors and General Electric in the early 20th century, allowing them to manage short-term cash needs efficiently.
Time-restricted deposits issued by banks that pay fixed interest rates until maturity.
Issuers
Banks and financial institutions
Typical Maturities
1 month to 1 year
Risk Level The relative risk of loss of principal compared to other money market instruments.
Low
Liquidity
Moderate to high
Tax Benefits Potential tax advantages from holding this type of instrument.
FDIC insurance (limits apply)
Yield Range (2023) The typical range of annual returns for this type of instrument in 2023.
4.9% - 5.6%
Notable Examples
Bank of America CDs, Chase CDs
Best For
Safety-oriented investors seeking higher yields than savings
Market Size
Significant retail and institutional market
Key Feature: FDIC insurance (limits apply), fixed rates
Did you know? Unlike other money market instruments, CDs often charge penalties for early withdrawal, making them less liquid but potentially higher-yielding.
Short-term borrowing arrangements where securities are sold with an agreement to repurchase them later.
Issuers
Banks, dealers, institutions
Typical Maturities
Overnight to 14 days
Risk Level The relative risk of loss of principal compared to other money market instruments.
Low
Liquidity
Very high
Tax Benefits Potential tax advantages from holding this type of instrument.
Fully taxable
Yield Range (2023) The typical range of annual returns for this type of instrument in 2023.
4.7% - 5.3%
Notable Examples
Federal Reserve repo operations
Best For
Institutional investors managing short-term liquidity
Market Size
Critical component in monetary operations
Key Feature: Collateralized, commonly used by central banks
Did you know? The repo market is a critical funding mechanism for the global financial system, with the Federal Reserve using repos to implement monetary policy and inject liquidity into markets.
Time drafts guaranteed by banks, commonly used in international trade finance.
Issuers
Banks backing trade transactions
Typical Maturities
30 to 180 days
Risk Level The relative risk of loss of principal compared to other money market instruments.
Low to moderate
Liquidity
Moderate
Tax Benefits Potential tax advantages from holding this type of instrument.
Fully taxable
Yield Range (2023) The typical range of annual returns for this type of instrument in 2023.
5.0% - 5.7%
Notable Examples
Letters of credit for international trade
Best For
Investors involved in international commerce
Market Size
Smaller but important for trade finance
Key Feature: Trade-related backing, international usage
Did you know? Banker's acceptances have been used in international trade for centuries, providing a secure way for exporters to receive payment while giving importers time to sell goods before paying.
Issuers sell money market instruments to raise short-term capital, typically for periods under one year.
These instruments emphasize safety and liquidity over high returns, making them valuable for cash management.
At maturity, investors receive their principal plus any interest or discount earned during the holding period.
Click on an instrument type above to explore its characteristics