The debt market, made up of the money market and the bond market, is an important element of the financial system. The bond market is usually seen as the market for long-term marketable debt instruments (ie bonds), and the money market as the market for short-term marketable debt instruments, such as commercial paper (CP) and treasury bills (TBs).

Thus, the bond market is the market in which governments and the prime members of the corporate sector are able to issue long-term bonds, and investors can invest in and trade in these bonds. This description is adequate.

The usual description of the money market, however, is not adequate because this market is much more than the market for short-term marketable debt instruments. The outstanding amount of short-term marketable debt instruments is small compared with the outstanding amount of short-term non-marketable debt, such as mortgage advances, overdraft facilities utilized instalment sale agreements and so on. These are also debt instruments (the assets of banks) issued by the ultimate borrowers (as are CP and TBs).

Interest rates (the price of debt) are determined in the entire market and not just in the marketable securities market. The "entire" market includes not only non-marketable debt but also the significant interbank market. It is in this market that interest rates have their genesis. There are two interbank markets, one where rates are set administratively (by the central bank), and the other where banks compete amongst one another for cash reserves (called Federal Funds in the US) in order to not borrow from the central bank (at the repo - also called discount - rate).

This interbank activity ensures that the bank-to-bank interbank rate closely follows the repo rate. The central bank (by ensuring that the banks are always indebted to it) is thus able to ensure that the repo rate is at all times made effective - which means that the central bank essentially "pinpoints" the short end of the yield curve. This is significant in that the central bank has a major influence on bank deposit rates (the majority of which are short-term) and therefore (via the bank margin) on bank lending rates (and generally on asset prices - which plays a major role in consumer behaviour - the main driver of the economy).

The level of bank lending rates influences the demand for credit, and growth in the latter is the main driver of the growth rate in the money stock. This significant money creation role of the banks is played out in the money market.
 

The overall objectives of the course are to:

• Expose the learner to the financial system
  
• Present the elements that make up the money market
  
• Focus on the generally neglected areas of money market, such as the interbank market and money creation.

The intended audience is persons involved in the financial sector (because money market interest rates are the basis of all financial markets), specifically:

• Private sector bankers
  
• Central bankers
  
• Members of securities exchanges
  
• Dealers in the financial sector: all markets
  
• Financial market analysts
  
• Economists.

The expected outcomes of the course are:

• Comprehend the environment of the money market: the financial system
  
• Understand the components of the money market
  
• Appreciate the importance of the money market in terms of the genesis of interest rates and money creation by the banks
  
• Be able to describe the composition of nominal interest rates
  
• Be able to execute calculations relevant in the money market: effective rates, maturity values, considerations, etc
  
• Have a rudimentary understanding of the money market derivative instruments.
  

Course Structure

This online course will involve a mix of self-study and online interaction culminating in a practical understanding of money market through online group work. Throughout the duration of the course, participants will go through theoretical and conceptual material prepared by UNITAR and will have an opportunity to relate it to real-life situations through online discussions and peer-to-peer interaction. There will be a quiz/assignment at the end of the course which is a requirement for obtaining a course certificate.

Course Outline

This course will comprise of the following modules:

• Money Market: Context: the Financial System
  This module presents a description (including illustrations) of the six elements that constitute financial system; this is the setting of the money market.
  
  
• Money Market: overview
  This module presents a detailed description of the money market; it has a number of facets other than short-term lending and borrowing.
  
  
• Money Market: Interbank Market & Monetary Policy
  This module covers two of the six elements that constitute the money market: money creation and the interbank market where monetary policy is implemented.
  
  
• Money Market: Mathematics
  This module presents the mathematics of the money market: interest add-on securities, discount securities, effective rates, short-term bonds, etc.
  
  
• Money Market: Deposit and Debt Securities
  This module presents the main characteristics of the two types of money market instruments: deposit securities [such as negotiable and non-negotiable certificates of deposit (NCDs and NNCDs)] and debt securities (such as commercial paper and treasury bills).
  
  
• Money Market: Derivative Instruments
  The money market derivative instruments are covered in this course because the money market has some unique derivative instruments, such as caps and floors, repos and forward rate agreements.

UNITAR online courses attempt to create a networked learning environment, in which participants have the flexibility to learn at their own convenience and pace but also are able to interact with peers and experts through the discussion board facility.

This online course will be conducted in the English language.
 

This course is designed as an online course in which participants will be primarily responsible for their own learning. Each lesson will consist of the following components:

1) Basic Reading Materials (Compulsory Reading Materials): these materials are intended to educate the participants about the basic concepts and principles applicable to the subject-matter of the lesson. It will include, where appropriate, sample materials. These materials will constitute the required reading materials for the lesson

2) Advanced Reading Materials (Optional Reading Materials): this will consist of optional reading materials for participants who wish to learn more about the topic than what is covered in the lesson.

3) External Links: This will refer the interested participants to additional books, articles, documents, and websites that deal with the issues raised in the lesson.

4) Glossary: A glossary of terms tailored to the online course will be provided to the participants and act as a learning support during the entire course.

5) Quizzes: At the end of each lesson there will be a set of quizzes for participants to answer. These quizzes are designed to test the participant's understanding of the lesson. Participants are required to pass each quiz and obtain at least 80% or more passing grade in order to be eligible for a certificate. All quizzes will need to be taken online.

6) Community Discussion Board: There will be a community discussion board available on which participants can post questions or comments that can be seen by the instructor and the other participants. This discussion board will be moderated by the course director and UNITAR. Structured discussion strings will be posted on a weekly basis.

All successful participants will be eligible to a certificate after completion of this online course.