Overnight rate

The overnight and term money market (also called money market ) is a branch of the money market, unsecured loans or deposits with a maturity are traded from one day up to one year on.

Purpose, bases

Due to the stringent regulatory requirements for banks (Basel II) of the overnight and term money market is taking more and more banks on a secured basis in the repo market.

Overnight and term money market is mainly through electronic trading systems instead and also specializing in this area broker. Market participants are mainly banks, which often act as market - makers, as well as insurance companies, pension funds, investment companies, large companies, government institutions and central banks.

The money market is one of the most important pillars of our financial system at all, since the different operators present in the financial exchange their liquidity. The daily traded volumes move in the U.S. dollar and the euro in the triple digits and the British pound and the Swiss franc in the double-digit billions.

Central hub for overnight and term money market is the appropriate central bank of the respective currency. So basically, every bank in their home currency clearing account at the central bank, through which the entire payment transaction is settled. Payments for overnight and term money transactions with banks is generally accessible by debiting or crediting of the sponsoring organization clearing account to the clearing account of the borrower. Are there any industrial or commercial companies involved, payment processing via the clearing account to the account-holding bank. In foreign currencies involve the payment processing via the appropriate clearing account of the correspondent bank of the respective counterparty is (s).

The purpose is to participate in the short-term overnight and term money market, is primarily cash management. Each company economically active policy to have a capital requirement or a capital overhang and a continuous flow of liquidity resulting from current operations. Meanwhile, a long-term capital needs and capital overhang is funded or created over time, the short-term liquidity position is quite exposed to large fluctuations. The balance of these fluctuations is via the overnight and term money market.

The level of interest overnight and term money market is based primarily on the base rate of the Central Bank and fluctuates depending on supply and demand around it.

Types of businesses and trade

Tagesgeld it may be:

• Overnight transaction in which the money is lent between the counterparties overnight overnight also briefly called Overnight. The money will be credited to the account of the borrower on the same day and paid back to the lenders, including interest, on the next day. To handle the associated payments, overnight transactions are made in the rule not later than 14 clock. Overnight transactions to close out in the interbank market making banks even after that date to its position.
• Tom / Next business will be abbreviated as T / N and denoted in the long form as Tomorrow -against- Next-Day. The money traders agree with it at the present day that is a counterparty to the other from tomorrow until the day after tomorrow money. On the next day the donors will receive back his principal amount including interest.
• Spot / Next - business is in the long- form spot -against- Next-Day. Borrowers and lenders agree on a money-lending, which is paid to the actually market value of the next day to the borrower and will be returned the following business day to the moneylenders, including interest.

As time deposits, however, everything is called, in which the borrower borrows the amount for more than one day. Beginning of business is usually on the next day ( market practice ). Repayment shall be made, including interest on the agreed date. The term is longer than one year only in exceptional cases.

A hybrid between overnight and term money represents the call money call money dar. have no fixed repayment date, but are available at any time to 48 hours or at any time be increased to 48 hours. The interest rate is not fixed, but can also be adjusted at any time to 48 hours. The call money is thus very similar in nature, depending on the direction of trade a current account or a bank overdraft.

Examples

• A company has to make salary payments in the amount of EUR 10 million at the present day. However, the receipt of payment from the sale of a service in the amount of EUR 12 million is not as predicted at the present day been credited to the bank account. Instead, as predicted in liquidity planning, will thus result in the present day no liquidity surplus of EUR 2 million, but a liquidity requirement of EUR 10 million. Therefore, the money traders taking EUR 10 million in its commercial bank as Overnight on to compensate for this short-term shortfall.

• A company must pay on the next working day payment at the rate of EUR 12 million. From the liquidity forecast can be seen that in order for the next 14 days on the current accounts of the company always results in a minimum loss of EUR 8 million. Only then is a receipt of payment which compensates for such payment. Therefore, the dealer takes money to a term deposit in the amount of EUR 8 million for this particular period in its commercial bank. Any further liquidity shortfalls he will cover over days money transactions in the form of overnight, Tom/Next- or Spot / Next stores. The money traders would also have the opportunity to offset these liquidity requirements only on days money transactions. He would thus a higher market price risk as call money rates as a function of the traded each market 's overall liquidity fluctuate more usually than the forward rate.

• Banking
• Financial market activities
• Futures
• Money market