Money Markets

Financial markets for short-term borrowing and lending, typically under one year, involving instruments like repos, commercial paper, and CDs.

What is Money Markets?

U.S. money markets handle $20 trillion in assets in 2025, with daily trading volumes of $5 trillion in repos and $2 trillion in T-bills. Participants include banks, corporations, and governments, with rates like SOFR at 4.83% and commercial paper at 5.0% for 3-months. Money market funds (MMFs) hold $6.5 trillion, investing in assets yielding 4.7% average.

They provide liquidity; during 2020, MMFs faced $150 billion outflows, prompting Fed facilities like MMLF to lend $50 billion. Instruments include CDs with $2.5 trillion outstanding and Eurodollars at $14 trillion. Regulations post-2008 require prime MMFs to float NAV, reducing risk.

In 2025, money markets reflect Fed policy, with yields compressing as rates fall, boosting corporate short-term funding at lower costs.