In My Economy Guide, we start a new article directory where you can find a lot of information about market types. This article will focus on marketsrather than basic economic concepts . In this article, we will look at the money market and bond . Before this article, we especially recommend that you read our Supply and Demand in the Economy .
The money market is where the money supplied by the central bank is demanded and received by companies, businesses, government and people. Interest plays an important role in this supply-demand event in the money market. Money changes hands with different nominal interest rates. Companies, businesses or government from the money market can obtain short-term financing. Short-term securities such as stocks and bonds are available in this market. Now let’s get to know the bill.
Bonds are short-term debt securities in their most simple and simple definition. Companies with strong reputation can easily borrow money in the money market by exporting their bonds in exchange for financing bonds.Consider a company as an example. This company cannot obtain its receivables on time and thus cannot find the money to be spent on its basic expenses. In this troubled situation, the company issues financing bills as a solution and thus obtains the necessary money. In this case, the company will obtain the required money at a lower cost than the long-term debt, and the borrower and the money issuer will gain interest in the short term.A financing bill does not express capital share. In other words, the person who buys the bonds of a company cannot be any shareholder or material collateral from the company. A financing bill is a type of debt without collateral.Companies whose reputation is not very strong accept higher interest rates when issuing their bonds. The reason for this is that the risk is higher than the companies with strong reputation. As a result, those companies who give money and buy bonds in return earn more in the short term with higher interest rates.
In addition to businesses, governments can also issue treasury bills to the market in order to meet their cash needs. These bonds are a better investment tool for investors. Because investors get interest income from their investments without any risk. Governments can thus easily meet their cash needs in the short term.