1、金融市場與機構(gòu)MoneyMarkets課件金融市場與機構(gòu)MoneyMarkets課件Chapter ObjectivesProvide a background on money market securitiesExplain how institutional investors use money marketsExplain the globalization of money marketsChapter ObjectivesProvide a ba1. Money Market SecuritiesMaturity of a year or lessDebt securities

2、issued by corporations and governments that need short-term fundsLarge primary market focusPurchased by corporations and financial institutionsSecondary market for securitiesProvide liquidity to investors1. Money Market SecuritiesMatu1. Money Market SecuritiesTreasury BillsCommercial paperNegotiable

3、 certificates of depositsRepurchase agreementsFederal fundsBankers acceptances1. Money Market SecuritiesTrea1.1 Money Market SecuritiesTreasury billsIssued to meet the short-term needs of the U.S. governmentSold weekly through an auction and one-year T-bills are issued on a monthly basisAttractive t

4、o investors Minimal default risk and low inflation riskExcellent liquidity for investors (deep market and liquid market)Short-term maturityVery good secondary market (government securities dealers)1.1 Money Market SecuritiesTreMoney Market SecuritiesTreasury bill auction (fill bids in amount determi

5、ned by Treasury borrowing needs)Bid process used to sell T-billsBids submitted to Federal Reserve banks by the deadline (before next Monday)Bid processAccepts highest bidsAccepts bids until Treasury needs generatedCompetitive BiddingMoney Market SecuritiesCompetiMoney Market SecuritiesTreasury bill

6、auctionnoncompetitive bids($1 million limit)May be used to make sure bid is acceptedPrice is the weighted average of the accepted competitive bids and changed from 1998 (the lowest accepted price)Investors do not know the price in advance so they submit check for full par valueAfter the auction, inv

7、estor receives check from the Treasury covering the difference between par and the actual priceNoncompetitive BiddingMoney Market SecuritiesNoncompMoney Market SecuritiesEstimating T-bill yieldNo coupon paymentsPar or face value received at maturityYield at issue is the difference between the sellin

8、g price and par or face value adjusted for timeIf sold prior to maturity in secondary marketYield based on the difference between price paid for T-bill and selling price adjusted for time Money Market SecuritiesEstimatMoney Market SecuritiesCalculating T-Bill Annualized YieldYTSP PP PP365 nYT = The

9、annualized yield from investing in a T-bill SP = Selling pricePP = Purchase price n = number of days of the investment (holding period)=Money Market SecuritiesCalculaMoney Market SecuritiesT-bill discount for a newly issued securityPar PP Par360 nT-bill discount = percent discount of the purchase pr

10、ice from parPar = Face value of the T-bills at maturityPP = Purchase price n = number of days to maturityT-bill discount=Money Market SecuritiesT-bill 1.2 Money Market SecuritiesShort-term debt instrumentAlternative to bank loan (finance inventory and accounts receivable)Dealer placed vs. directly p

11、lacedUsed only by well-known and creditworthy firmsUnsecuredMinimum denominations of $100,000Not a large secondary marketCommercial Paper1.2 Money Market SecuritiesComMoney Market SecuritiesCommercial paper backed by bank lines of creditBank line used if company loses credit rating (cannot repay the

12、 borrow money)Bank lends to pay off commercial paperBank charges fees for guaranteed line of credit Could decrease the default risk and interest rate of commercial paper Willing to pay fee cause could save interest rate costMoney Market SecuritiesCommercMoney Market SecuritiesEstimating commercial p

13、aper yieldsYCPPar PP PP360 nYCP = Commercial paper yieldPar = Face value at maturityPP = Purchase price n = number of days to maturity=Money Market SecuritiesEstimatMoney Market SecuritiesThe lower price the firm sells its commercial paper, the higher cost of raising funds they should pay. Though th

14、e cost of issuance commercial paper is low, compared with bank loan, many creditworthy companies still borrow money from banks in order to maintain business relationship with them. Money Market SecuritiesThe low1.3 Money Market SecuritiesIssued by large commercial banks and other depository institut

15、ions also called bearer instrumentMinimum denomination of $100,000 but $1 million more commonPurchased by nonfinancial corporations or money market funds Secondary markets supported by dealers in securityNegotiable Certificates of Deposit (NCD)1.3 Money Market SecuritiesNegMoney Market SecuritiesNCD

16、 placementDirect placementUse a correspondent institution specializing in placementSell to securities dealers who resellSell direct to investors at a higher priceNCD premiumsRate above T-bill rate to compensate for lower liquidity and safetyMoney Market SecuritiesNCD pla1.4 Money Market SecuritiesSe

17、ll a security with the agreement to repurchase it at a specified date and priceBorrower defaults, lender has security (loan backed by securities)Reverse repo name for transaction from lenderNegotiated over telecommunications networkDealers and brokers used or direct placementNo secondary marketRepur

18、chase Agreements1.4 Money Market SecuritiesRepMoney Market SecuritiesEstimating repurchase agreement yieldsRepo RateSP PP PP360 nRepo Rate = Yield on the repurchase agreementSP = Selling pricePP = Purchase price n = number of days to maturity=Money Market SecuritiesEstimat1.5 Money Market Securities

19、Interbank lending and borrowingFederal funds rate usually slightly higher than T-bill rateFed district bank debits and credits accounts for purchase (borrowing) and sale (lending)Federal funds brokers may match up buyers and sellers using telecommunications networkUsually $5 million or moreFederal F

20、unds1.5 Money Market SecuritiesFedMoney Market SecuritiesThe federal funds rate are monitored by all financial participants cause it affect general economic conditions Many banks prefer to borrow money from other banks rather than from federal bank Avoid the attention paid by federal bank for their

21、liquid problems Use the excess reserve to earn interest incomeMoney Market SecuritiesThe fed1.6 Money Market SecuritiesA bank takes responsibility for a future payment of trade bill of exchangeUsed mostly in international transactionsExporters send goods to a foreign destination and want payment ass

22、urance before sendingBank stamps a time draft from the importer ACCEPTED and obligates the bank to make good on the payment at a specific timeBankers Acceptance1.6 Money Market SecuritiesBanExhibit 6.5a1Purchase OrderShipment of Goods5L/C3Shipping Documents & Time DraftDraft Accepted (B/A Created)7J

23、apanese Bank(Exporters Bank)American Bank(Importers Bank)ImporterExporter2L/C (Letter of Credit) Application4L/C Notification6Shipping Documents & Time DraftExhibit 6.5a1Purchase OrderShiMoney Market SecuritiesExporter can hold until the date or sell before maturityIf sold to get the cash before mat

24、urity, price received is a discount from drafts totalReturn is based on calculations for other discount securitiesThe credit risk on a B/A is similar to that of NCDs, why?Bankers AcceptanceMoney Market SecuritiesBankers2.1 Major Participants in Money MarketParticipants (Exhibit 6.4)Commercial banksF

25、inance, industrial, and service companiesFederal and state governmentsMoney market mutual fundsAll other financial institutions (investing)Short-term investing for income and liquidityShort-term financing for short and permanent needsLarge transaction size and telecommunication network2.1 Major Part

26、icipants in Mon2.1 Major Participants in Money MarketIn which two ways money market securities can be used to enhance liquidity?Why T-bills are most popular instrument for most financial institutions?If financial institutions whose future cash flow are uncertain, they want own more money markets sec

27、urities or less? Many money market transactions involve two financial institutions.2.1 Major Participants in Mon2.2 Valuation of Money Market SecuritiesPresent value of future cash flows at maturity (zero coupon)Short-term interest rate directly related to money market security valuesValue (price) i

28、nversely related to discount rate or yieldMoney market security prices more stable than longer term bondsYields = risk-free rate + default risk premium2.2 Valuation of Money Market Exhibit 6.5aInternationalEconomicConditionsU.S.FiscalPolicyIssuersIndustryConditionsRiskPremiumof IssuerShort-TermRisk-

29、FreeInterestRate(T-bill Rate)IssuersUniqueConditionsU.S.MonetaryPolicyU.S.EconomicConditionsRequired Returnon the MoneyMarket SecurityPrice of theMoney MarketSecurityExhibit 6.5aInternationalEconoValuation of Money Market SecuritiesIn order to gain high return, all investors monitor indicators (empl

30、oyment, GDP, retail sales, industrial production, consumer confidence, inflation)Example: 9.11 AttackQuestion: Why all money market security yields declined to the lowest level after 9.11 attack? Valuation of Money Market Secu2.3 Interaction Among Money Market YieldsSecurities are close investment s

31、ubstitutesInvestors trade to maintain yield differentialsT-Bill is the benchmark yield in money marketYield changes in T-bills quickly impacts other securities via dealer tradingYield differentials determined by risk differences between securitiesDefault risk premiums vary inversely with economic co

32、nditions2.3 Interaction Among Money MaInteraction Among Money Market YieldsFlight to quality Theactionofinvestorsmoving their capital away from riskierinvestments tothe safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or international markets. Howeve

33、r, at other times, this movemay be an instance of investorscutting backon the more volatile investments for the conservative ones (i.e. diversifying) withoutmuch considerationof the international markets. Interaction Among Money Market3. Globalization of Money MarketsMoney market rates vary by count

34、rySegmented marketsTax differencesEstimated exchange ratesGovernment barriers to capital flowsDeregulation Improves Financial IntegrationCapital Flows To Highest Rate of Return3. Globalization of Money Mark3.1 Globalization of Money MarketsEurodollar deposits Dollar deposits in banks outside the U.S

35、. Increased because of international trade growth and U.S. trade deficits over timeNo reserve requirements at banks outside U.S.Eurodollar CDs and FRCDsEurodollar Loans Channel funds to other multinationals that need short-term financingEurocurrency market (Eurocredit market)3.1 Globalization of Money Mar3.2 Globalization of Money MarketsEuronotes are issued in bearer form (1.3.6 monthes)Euro-commercial paperIssued without the backing of a banking syndicateMaturity tailored to investorsDealers that place paper create a secondary marketRates range between 50