Which market encompasses transactions for short-term instruments issued by borrowers with high credit ratings?

The money market is characterized by its focus on the trading of short-term debt instruments, typically with maturities of one year or less. Instruments that are commonly found in the money market include Treasury bills, commercial paper, and certificates of deposit. These instruments are usually issued by borrowers with high credit ratings, such as governments and blue-chip corporations, which allows for relatively lower risk in these transactions.

This market is essential for managing liquidity and providing a means for participants to invest in very short-term financial instruments while maintaining a lower risk profile. Because of the emphasis on short-term borrowing and lending between financial institutions and other entities, it serves as a vital component of the financial system, helping to maintain overall economic stability.

In contrast, secondary markets deal with the buying and selling of previously issued securities, capital markets are focused on long-term equity and debt instruments, and futures markets involve contracts to buy or sell assets at a future date, which is not primarily focused on short-term debt instruments.