Money-Market Instruments

The exam loves to make you sort instruments into the money market by maturity, so the reflex is “one year or less.” Watch the disguise: a 10-year T-bond with 9 months remaining IS now a money-market security — for an already-issued bond, remaining maturity, not original maturity, governs tradability (any government, muni, or corporate issue under a year trades here). The other classic pattern hands you a clue word and wants the product: “overnight loan collateralized by securities” = repurchase agreement, “unsecured corporate IOU” = commercial paper, “$100,000+ tradable bank deposit” = negotiable (jumbo) CD.

Among newly issued Treasuries only the T-bill is money-market; notes and bonds start as capital-market paper even though they’re equally liquid. And money-market ≠ risk-free: it’s low credit and low interest-rate risk, but not zero — unsecured commercial paper can default. Don’t confuse genuine money-market liquidity with illiquid alternatives like DPPs, which have no real secondary market. Memory hook: B-A finances “buy abroad.”