Distinguish between the money and capital markets Essay

Distinguish between the money and capital markets - Essay Example Money markets encompass a broad assortment of institutions and procedures that are related to and transact in short-term debt instruments (which have maturity periods of less than a year). These instruments are usually issued by borrowers that boast of high credit ratings. Good examples of instruments traded in money markets are U.S. Treasury bills, many federal agency securities, bankers’ acceptances, commercial paper and negotiable certificates of deposit. Common equities or shares of publically traded companies do not come under the money market. One of the distinguishing features of money market is that it is an intangible market, for most of the transactions are carried out through electronic network systems. Further, â€Å"the money market is designed for the making short-term loans where individuals and institutions with temporary surpluses of funds meet borrowers who have temporary cash shortages. One of the principal functions of the money market is to finance the wo rking-capital needs of corporations and to provide governments with short-term funds in lieu of tax collections. The money market also supplies funds for speculative buying of securities and commodities.† (www.thefutureofmoney.blogspot.com, 2009)