Short-term funding instruments — where banks, corporates and governments borrow for days to a year.
The market at a glance
Money markets are finance's circulatory system: the short-term (overnight to one year) funding markets where governments, banks and corporations borrow the cash that keeps everything running. The scale is staggering — US repo alone turns over $4+ trillion daily, money-market funds hold over $6 trillion, and the T-bill stock exceeds $5 trillion.
This is deliberately the most boring market in finance — near-zero credit risk, near-zero duration — and that boringness is load-bearing: money markets are where "cash" gets its meaning. When they misbehave (2008, September 2019, March 2020), everything else stops working within days, which is why central banks now maintain standing facilities to cap rates on both sides.
Who does what
Governments roll T-bills weekly — the safe asset everyone else prices against.
Dealers and hedge funds finance securities inventories in repo — the leverage machine of fixed income.
Corporates and banks issue commercial paper and CDs for working capital and funding.
Money-market funds aggregate savers' cash and lend it into all of the above overnight — the system's great intermediary and, in crises, its great accelerant.
The conventions trap
Money markets quote the same economics three incompatible ways: discount yields (360-day, off face value), bond-equivalent yields (365-day, off price), and effective annual rates. A "5.00%" bill and a "5.00%" deposit are not the same rate. The converter below translates — a small skill that marks you as someone who's actually traded this market.
Interactive: T-bill yield converter
From a bill's price and days to maturity, get all three yield conventions at once.
Discount yield (360d)
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Bond-equivalent yield
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Effective annual
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Same bill, three "rates" — always ask which convention a money-market quote uses before comparing anything.
Concepts to master
Secured vs. unsecured — repo (collateralised) vs. CP/CD (bank/corporate promise): the spread between them is the system's credit-stress gauge, the modern descendant of the LIBOR-OIS spread.
Collateral is money — Treasuries function as cash in this world; their scarcity or abundance (bills-OIS spread, repo specialness) moves everything.
Runs happen here first — maturity transformation without deposit insurance means the "safest" markets host the fastest panics. Every modern crisis chapter one is a money-market chapter.
The corridor — central banks steer these rates with floors (reverse repo) and ceilings (standing repo); reading actual prints against the corridor tells you reserve scarcity in real time.