The money market is in the broad sense an informal market where financial institutions - National treasures, central banks, banks, managers of funds, insurers, etc - and the large companies place their short-term assets to get short financings. By " court" , one hears, generally less than one year, sometimes less than two years.
Treated productsThey are particularly numerous.
Products the cashAmong the instruments the cash, which are thus the direct instruments of refinancing or placement of cash, one finds:
interbank ready " in blanc" , cad not guaranteed (see Euribor, LIBOR), which is at the same time the most risked operation, the most framed and, however, the least frequent of the money market;
- interbank ready guaranteed , or pensions , on credits identified but not delivered to the counterpart;
- the delivered pension or Repo , diminutive of " repurchase agreement" , i.e. the loan of cash guaranteed by the simultaneous cash sale, with delivery, of negotiable financial credits (obligations, bills Treasury, certificates of deposit, etc) which is untied, with the expiry of the loan of cash, by the repurchase of the same credits;
- the negotiable evidences of indebtedness , produced in the short run de facto with knowing mainly the good of the Treasury emitted by the National treasures (those of the French Treasury are short BTF and BTAN), the certificates of deposit emitted by the banks and the commercial papers emitted by the companies;
- of the transferable securities , theoretically accessible to the private individuals, mainly of the Government loans (for France, to see: OAT) short but also of the short obligation emitted by the local government agencies or the companies;
- the deposits in currencies ;
Derivative productsThe treated derivative products are not fewer and varied. More liquid generally than the equivalent instruments the cash, they make it possible to the speakers to adjust their risks of interest rate without having to leave the credits of their assessment or without increasing their risks of counterpart. The first of them, historically, and that one finds even on the money markets of the emergent countries, are incontestably:
the Change in the long term , which corresponds has a virtual loan in a currency and with a virtual loan in another currency;
- and FRA , acronym of Forward Misses Agreement , contract private making it possible to fix an interbank rate in the future, for example a rate in 3 months in two months.
Then, on the most important money markets, one a:
the swap S of interest rate , i.e. contracts of exchange of interest rate, generally of a rate fixes against a fluctuating rate, based:
- is on Taux at the day-the-day - for the euro area, the Eonia - noted and published by a central bank or a company doctor; the English name of these swaps is OIS , for Overnight Indexed Swaps ;
- is on the rates of the interbank loans in white, IBOR (Interbank Offered Rates), also noted and published by a central bank or a company doctor (see Euribor, LIBOR);
- the contracts in the long term and option S on contracts in the long term on organized gone like the LIFFE or Eurex;
- the options on swaps Private or Swaption S;
Money market of the euro area and American money marketOf an about equivalent volume, the money market of the euro area and that of the United States are, by far, most active and most important of the world. On certain instruments, like the repo, they account for with them two up to 90% of the world transactions.
There exists, on each one of these two markets, approximately two gone directing of the short rates:
- with very short term, that of the loans in white to the day-the-day:
- which is called Fed Funds in the United States;
- and whose average rate, in the euro area, is the Eonia;
- later on, that of the future contracts on IBOR:
Conventions of calculation of the ratesThe instruments at more than one year are often negotiated in Annual percentage rate with an exact calculation of days ( Actuel/Actuel ).
On the other hand, in Continental Europe and in the United States, the money markets generally use for the instruments of less than one year:
a calculation of calendar days exact;
- one 360 days year.
very precise conventions relate to the days considered as wrought, and how the accidents of the calendar affect, instrument by instrument, standard durations (for example: one week, or a month) which one negotiates on the money market.
Operations of the central bankIn order to make safe the system of payment interbank, it was set up for the euro area an officialized core obeying at very strict rules, reserved to the main operators of the money market, for the Central bank S main roads and the ECBS, all connected by computing system TARGET of the ECB. These operators must adjust permanently and almost in real-time their balance near the central banks.
Beyond the management of the system of payment, a central bank uses the money market for:
to manage with the daily newspaper the liquidity (to pump the surpluses or to satisfy the needs) banking system, and by osmosis, of the economy in general (to fight the Inflation or the Déflation for example and, in the event of financial crisis, to provide sufficient liquidities to avoid a stop of the financial system, even bankruptcies in chains - what was in particular made on September 11th, 2001);
to control short-term interest rates (see directing Rate), in this same optics of intervention on the economic conjuncture;
to place monetary reserves of the foreign central banks. At the end of the years 1990, those became colossal, mainly in Asia, and an important part of the activity of the central banks American and European on the markets is carried out for the account of Asian central banks.
In addition, the banks of the euro area must constitute obligatory Reserves near the ECB.
- Central Bank European
- Banque de France
- Federal fund of the United States
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