The money market yields are the income generated in investing in the various money market instruments. Annual Percentage Yield is the financial tool that is used to calculate the yield from each of these money market instruments .
The money market yields of different money market instruments may be discussed as under the following heads:
• The money market yield of Treasury Bills: The Treasury bills are the short term money market security that mature in a year or less than that. The purchase price is less than the the face value. At maturity the government pays the Treasury Bill holder the full face value.
They are marketable, affordable and risk free. They are also free from local and state tax impositions.
But the disadvantage is that the security attached to the treasury bills comes at the cost of very low returns.
Looking at the current rates the APY on the 28 day treasury bill is 5.10%, 91-day Treasury Bill is 5.21% and the 182-day treasury bill is 5.21%
• The Money Market Yield of Certificate of Deposit: The certificate of deposit are basically time deposits that are issued by the commercial banks wit maturity periods ranging from 3 months to five years. The return on the certificate of deposit is higher than the Treasury Bills because it assumes a higher level of risk.
Certificates of Deposit are much safe since they are guaranteed by the Federal Insurance Corporation. One can earn more as compared to depositing money in savings account.
Certificate of deposit has low money market yields as compared to other investments tools.. The money is tied along with the long maturity period of the Certificate of deposit.
The Annual Percentage yield of the Certificates of deposit held by the Ameriprise bank is 4.85% for the 3 months CD, 4.9% for th 6 months CD, 4.8% for the one year CD, 4.5 % for the 2 year CD and 4.45% for the 3 and 5 years term CDs. Hence we see that as the maturity period of holding the CD increases, so does the money market yield on it.
• Money Market Yield on Commercial Paper: Commercial Pape r is short term loan that is issued by a corporation use for financing accounts receivable and inventories. The average money market yield on commercial paper is about 5.05%.
• Banker's Acceptance: It is a short term credit investment . It is guaranteed by a bank to make payments. The Banker's Acceptance are traded in the Secondary market. The average money market yield for the banker's acceptance is almost the same as that on the commercial paper i.e 5.05%.
• Euro Dollars : The Eurodollars are basically dollar- denominated deposits that are held in banks outside the United States. Since the Eurodollar market is free from any stringent regulations, the banks can operate at narrower margins as compared to the banks in U.S. The Eurodollars are traded at very high denominations and mature before six months. The Eurodollar market is within the reach of large institutions only and individual investors can access it only through money market funds.