Money Market Instruments

Money Market is the part of financial market where instruments with high
liquidity and very short-term maturities are traded. It's the place where
large financial institutions, dealers and government participate and meet
out their short-term cash needs.
They usually borrow and lend money with the help of instruments or
securities to generate liquidity. Due to highly liquid nature of securities and
their short-term maturities, money market is treated as safe place.

Commercial Papers:
In

the

global money

market, commercial

paper is

an unsecured promissory note with a fixed maturity of no more than

270 days. Commercial paper is a money-market security issued (sold)
by large corporations to get money to meet short term debt obligations
(for example, payroll), and is only backed by an issuing bank or
corporation's promised to pay the face amount on the maturity date
specified on the note. Since it is not backed bycollateral, only firms
with excellent credit ratings from a recognized rating agency will be
able to sell their commercial paper at a reasonable price. Commercial
paper is usually sold at a discount from face value, and carries higher
interest repayment rates than bonds. Typically, the longer the maturity
on a note, the higher the interest rate the issuing institution must pay.
Interest rates fluctuate with market conditions, but are typically lower
than banks' rates.

Trade Credit:
Trade credit is the largest use of capital for a majority of business to
business (B2B) sellers in the United States and is a critical source of
capital for a majority of all businesses. For example, Wal-Mart, the
largest retailer in the world, has used trade credit as a larger source of
capital than bank borrowings; trade credit for Wal-Mart is 8 times the
amount of capital invested by shareholders. [1] Trade credit is the credit
extended by one trader to another for the purchase of goods and

services. Trade credit facilitates the purchase of supplies without

immediate payment.Trade credit is commonly used by business
organisations as a source of short-term financing.It is granted to those
customers who have reasonable amount of financial standing and
goodwill.
There

are

many

forms

of

trade

credit

in

common

use.

Various industries use various specialized forms. They all have, in

common, the collaboration of businesses to make efficient use of
capital to accomplish various business objectives.
The bills can be either variable rate or fixed rate, with periods varying
between 1 and 10 years. During the loan term there are rollover
periods, at which time the interest rate and the amount borrowed may
be recalculated. The rollover period may be 30, 60, 90, 180 days, 6
monthly or even annually. Interest is paid at each rollover, and you
may negotiate any number of combinations to suit you.
Ceiling Rates
Similar to capped rates, a ceiling rate is a feature applied to a variable
rate commercial bill that puts a ceiling on, or limits, how high the rate
can go. This can be particularly useful in a volatile interest climate, but
be aware that lenders will generally offset the potential costs of a
ceiling rate with a higher starting, or floor rate.
Interest Rates and Terms
With fixed rate bills, your interest rate is constant for the term of the
facility, which may include several rollovers. With variable rate bills,
the interest rate is fixed for each rollover period, and may change as
the period is extended or rolled over, the interest rate may rise or fall.
Commercial paper is a money-market security issued by large banks and
corporations. It is generally not used to finance long-term investments but rather
to purchase inventory or to manage working capital

A Commercial Bill assists you to raise finance through the drawing and
discounting of negotiable bank bills. Under this facility Bank agrees to both
accept and discount a customer's bills. You can choose from an array of facilities
utilising the latest financial market techniques to suit your individual
requirements. This is commonly used for medium and long term financing