Australia Yearbook - 2001

Chapter 26—Financial system 895
Money market
Liquidity management by Australian corporations,
financial institutions and governments is
conducted through an informally arranged
market for deposits, loans and placements and by
issuance, purchase and sale of short-term debt
securities. Rates in the market at end June of the
last three financial years are shown in table 26.16.
Money market securities have an original term to
maturity of less than one year, often 30, 90 or
180 days. They are issued by borrowers at a
discount to face value and carry no income
payment other than the repayment of face value
at maturity. To enhance liquidity, money market
securities conform to standardised attributes
concerning risk and discount rates. Because of
the standardisation, the securities of different
issuers are often combined in the one parcel of
securities for trading purposes. There are two
types of securities: bills of exchange and one
name paper (promissory notes, treasury notes,
commercial paper and bank certificates of
deposits), both of which are covered by the Bills
of Exchange Act 1909. The risk of default of a bill
of exchange is reduced by an acceptor or
endorser adding their name to the security for a
fee. Most bills of exchange traded in the market
are bank-accepted bills. Promissory notes are
issued by institutions whose credit worthiness is
equal to or better than banks; they are not
accepted by a bank and unlike bills of exchange
they are not endorsed by the parties which sell
them in the market. The Commonwealth
Government issues treasury notes, State
Governments and large corporations issue
commercial paper and banks issue negotiable
certificates of deposit. Table 26.17 shows the
amount on issue by sector of issuer and sector of
holder of the various types of money market
securities.
26.16 SHORT-TERM MONEY MARKET RATES
June 1998 June 1999
June 2000
% p.a. % p.a. % p.a.
11am call 5.07 4.80 6.01
Bank-accepted bills—90 days 5.32 4.93 6.23
Source: Reserve Bank of Australia Bulletin.