The money market
The market for debt which matures over a period of one year or less. New York City has the world's largest money market, followed by London and Tokyo.
- Treasury bills
- A form of short-term government debt sold on the money market. Auctions of 91-day and 182-day bills are held weekly by the Treasury, using the Federal Reserve as its agent. Their yields are watched closely as an indicator of short-term interest rate trends. The 52-week bill is issued every month.
- Repos
- Short for repurchase agreement, this is the most common type of money market operation. A repo is the equivalent of a short-term loan. A bond is sold with an agreement to buy it back later at an agreed price and usually at a stated time. For the Fed, repos are the only way to offset drains on bank reserves.
The bond market
The market for debt which matures over a period of one year or more. The US Treasury issues bonds through the Federal Reserve. US government debt is issued as bonds (of 30-year maturity), notes (with maturities of between two and 10 years) and bills (with maturity of less than one year).
- Treasury bonds
- Bond with maturities of 30 years at issue. The most recent issue is known as the long bond. Also referred to as T-bonds or simply Treasuries. The yield on 30-year T-bonds is watched closely as an indicator of long-term interest rates.
- Treasury notes
- Intermediate securities with maturities from two to 10 years. The two- and five-year notes are issued every month, the three- and 10-year notes every quarter.
- Treasury bills
- Short-term securities with maturities of one year or less, traded on the money market. Auctions of 91-day and 182-day bills are held weekly, and their yields are watched closely as an indicator of short-term interest rates. The 52-week bill is issued every month.
