Money market

Money Digest, Jan, 1998

If you want to earn slightly higher interest rates with the ability to cash in at short notice, you may choose the money market. Money market instruments such as Treasury Bills or Certificates of Deposit let you lend money to the government or to a private corporation for short periods of time. This is an excellent way to stay liquid and earn a relatively high rate of interest at the same time.

Money market investments include T-bills (lending money to the government), CDs (lending money to banks), and Commercial Paper (lending money to businesses). T-bills are the most common form of money market investments.

                 Annual yields of money market instruments
                          as at mid-December 1997

                          1 month  3 months  6 months
                            (%)      (%)       (%)


T-bill                       3.05      3.71      4.12
Commercial paper             4.35      4.54     -
Banker's acceptance (CD)     3.95      4.23      4.41

Most of these investments require a large minimum, such as $25,000, although smaller investments (such as $5,000 or even $1,000) will be accepted in some instances. Smaller deposits, however, command a lower interest rate. See the above table for recent rates.

How to Find Out More

If you want to invest in any money market instrument, you should contact your broker. Current rates for different money market instruments are regularly quoted in the financial press.