B Common money market instruments

- Treasury bills (or T-bills) are bonds issued by governments. The most common maturity - the length of time before a bond becomes repayable - is three months, although they can have a maturity of up to one year. T-bills in a country's own currency are generally the safest possible investment. They are usually sold at a discount from their nominal value - the value written on them - rather than paying interest. For example, a T-bill can be sold at99% of the value written on it, and redeemed or paid back at 100% at maturity, three months later.

(Professional English in Use. Finance)

- Commercial paper is a short-term loan issued by major companies, also sold at a discount. It is unsecured, which means it is not guaranteed by the company's assets.

- Certificates of deposit (or CDs) are short- or medium-term, interest-paying debt instruments - written promises to repay a debt. They are issued by banks to large depositors who can then trade them in the short-term money markets. They are known as time deposits, because the holder agrees to lend the money - by buying the certificate - for a specified amount of time.

C Repos

Another very common form of financial contract is a repurchase agreement (or repo). A repo is a combination of two transactions. The dealer hopes to find a long-term buyer for the securities before repurchasing them.

• Short-term investor buys securities. Amount investor lends to dealer, by buying securities, is less than the market value of the securities. This is so investor avoids a loss if price of securities, and their value as collateral, falls.

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