【正文】 n emergency develops ?May be difficult to raise funds in the paper market at times ?Commercial paper must generally remain outstanding until maturity does not permit early retirement without penalty ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 13 Continuing Innovation in the Paper Market ? Innovations and extensions of the paper market include: ? Master note – the investing firm agrees to take some paper each day up to an agreedupon maximum amount ? Mediumterm notes – 9month to 10year notes ? Assetbacked mercial paper – loans or credit receivables are pooled and paper is then issued as a claim against that pool ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 14 Federal Agency Securities ? Certain sectors of the economy, such as agriculture, housing, small businesses, and college students, appear to have an unusually difficult time raising funds in the money and capital markets. ? Beginning in 1916, the . federal government created special agencies to make direct loans or guarantee private loans to these “disadvantaged” borrowers. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 15 Types of Federal Credit Agencies ? Governmentsponsored agencies are federally chartered but privately owned. Their borrowing and lending activities are not reflected in the federal government’s budget. ? Examples: ? Federal Farm Credit Banks (FFCB) ? Federal Home Loan Mortgage Corp (Freddie Mac) ? Student Loan Marketing Association (Sallie Mae) ? Financing Assistance Corporation (FAC) ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 16 Types of Federal Credit Agencies ? Federal agencies are legally a part of the government structure, and their borrowing and lending activities are included in the federal budget. ? Examples: ? ExportImport Bank (EXIM) ? Farmers Home Administration (FMHA) ? Government National Mortgage Association (Ginnie Mae) ? Federal Deposit Insurance Corporation (FDIC) ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 17 The Roles of Federal Credit Agencies Performing the Roles of a Financial Intermediary Federal amp。 large depositors with excess reserves available (suppliers) Banks needing more legal reserves amp。 Disadvantages ? Continuing Innovation in the Paper Market ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 39 Chapter Review ? Federal Agency Securities ? Types of Federal Credit Agencies ? The Roles of Federal Credit Agencies ? Growth of the Agency Market ? Terms on Agency Securities ? The Marketing of Agency Issues ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 40 Chapter Review ?Bankers’ Acceptances ? Why Acceptances Are Used in International Trade ? How Acceptances Arise ? The Growth and Decline of Acceptance Financing ? Acceptance Rates ? Investors in Acceptances ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 41 Chapter Review ? Eurocurrency Deposits ? What is a Eurodollar? ? The Creation of Eurocurrency Deposits ? Eurocurrency Maturities and Risks ? The Supply of Eurocurrency Deposits ? Eurodollars in . Domestic Bank Operations ? Benefits and Costs of the Eurocurrency Markets ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 42 ? Learning Objectives ? ? To examine the characteristics of Treasury bills and the workings of the government securities market. ? To learn how securities dealers operate and why they are so important to the functioning of the money market. ? To understand how banks borrow and lend funds through Federal funds trading and the issuance of CDs. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 43 ? Learning Objectives ? ? To see the impact that the managerial strategy known as liability management has on bank performance and practice in recent years. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 44 Introduction ? The money market supplies the cash needs of shortterm borrowers and provides savers who hold temporary cash surpluses with an interestbearing outlet for their funds. ? In this chapter, we focus on securities dealers and banks, and explore in detail four popular money market instruments – Treasury bills, repurchase agreements, Federal funds, and bank CDs. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 45 . Treasury Bills ? . Treasury bills (Tbills) are direct obligations of the . government that have an original maturity of one year or less. ? Tax revenues or any other source of government funds may be used to repay the holders of these financial instruments. ? They carry great weight in the financial system due to their zero (or nearly zero) default risk, ready marketability, and high liquidity. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 46 Volume of . Treasury Bills Outstanding Data Source: Board of Governors of the Federal Reserve System 1960 $ $ % 1965 1970 1975 1980 1985 1, 1990 2, 1995 3, 2020 2, 2020 2, End of Year Total Volume of Bills Outstanding ($ Billions) Marketable Public Debt of the . ($ Billions) Tbills as a % of the Total Marketable Public Debt ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 11 47 Types of Treasury Bills ? Regularseries bills are issued routinely every week or month in petitive auctions with