Treasury Notes Vs. Money Markets
Credit plays an essential role in fueling economic growth and international trade. Governments, banks and corporations rely on Treasury notes and money market instruments to keep their operations going. As these entities issue these financial securities, individuals and other investment firms can reap profits from them. Investors may not receive large profits, but they like these securities because they're safe.
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Function
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The U.S. government uses Treasury notes to pay interest obligations. For money markets, dealers and financial institutions borrow or lend money from and to each other. These entities borrow or lend for short periods of time, which is usually about 13 months.
Facts
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Treasury notes are government debt financing securities that the U.S. Department of Treasury issues to bondholders. Financial companies usually rely on money markets to fund their operations by issuing large quantities of asset-backed commercial paper.
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Types
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Two types of Treasury securities exist: marketable and non-marketable. Marketable securities are Treasury notes, Treasury Inflation Protected Securities (TIPS), Treasury bonds, and Treasury bills. Non-marketable securities are savings bonds and State and Local Government Series (SLGS). Many types of securities make up the money market, including municipal notes, commercial paper, certificates of deposit and repurchase agreements.
Considerations
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Both Treasury notes and money markets are considered safe investments. However, they pay low interest compared with other financial securities.
Benefits
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Both Treasury bills and money markets are good for diversifying your investment portfolio. They're also liquid, which means you can get out of these investments quickly.
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