Money Market Deals
Money market deals are short-term borrowing and lending transactions between financial institutions, typically with maturities ranging from overnight to one year. They are used to manage short-term liquidity positions, fund balance sheet requirements, and optimise the bank's cost of funds.
💰 Key Characteristics
- Short-term tenors: overnight (O/N), tom-next (T/N), spot-next (S/N), 1 week to 12 months.
- Conducted as unsecured interbank placements or borrowings.
- Rates referenced to benchmark rates: SORA (SGD), SOFR (USD), €STR (EUR).
- No collateral required for unsecured deals — counterparty credit risk applies.
- Placements and borrowings must stay within approved counterparty and currency limits.
- Interest calculated on an actual/360 or actual/365 basis depending on currency.
🧾 Deal Types
| Deal Type | Description |
|---|---|
| Interbank Placement | Bank lends excess funds to another bank |
| Interbank Borrowing | Bank raises short-term funds from another bank |
| Call Deposit | Overnight or on-demand deposit with another institution |
| Notice Deposit | Deposit with agreed notice period (e.g., 7 days) before withdrawal |
| Fixed Deposit (Wholesale) | Fixed term deposit between institutions (7 days to 12 months) |
| Certificate of Deposit (CD) | Negotiable short-term paper issued by a bank |
🛠️ Operational Workflow
- Treasury dealer identifies surplus or deficit liquidity position from cash flow forecast
- Rate agreed with counterparty (direct, via broker, or electronic platform e.g. Bloomberg TPCD)
- Deal ticket captured in treasury management system (TMS)
- Confirmation sent via SWIFT MT320 (fixed loan/deposit confirmation)
- Counterparty confirmation received and matched
- Payment instructions issued on value date — principal transferred via MEPS+ (SGD) or CHIPS/Fedwire (USD)
- Interest accrued daily in financial accounting system
- On maturity: principal + interest received/paid and deal closed in TMS
🧮 Example Calculation
Illustrative scenario: SGD 20,000,000 is placed with a counterparty bank for seven days at a fixed all-in rate of 3.20% p.a.
The all-in rate is assumed for illustration; an actual SORA-linked transaction must use the agreed observation, compounding and spread conventions.
Interest = Principal × Rate × Days / 365 = 20,000,000 × 3.20% × 7 / 365 = SGD 12,273.97
Total maturity proceeds = SGD 20,000,000 + SGD 12,273.97 = SGD 20,012,273.97
📋 Compliance & Monitoring
- Counterparty credit limits reviewed and approved annually by credit committee
- Intraday and overnight exposure tracked against limits; breaches escalated immediately
- LCR and NSFR monitored internally and reported to MAS at the frequency applicable to the institution
- Derivatives and other reportable transactions reported where they fall within the scope of applicable MAS reporting requirements
- Interest rate risk: sensitivity of MM book to rate movements monitored via PV01
- SORA publication monitored daily — discrepancies from expected levels flagged to risk
- Nostro and settlement account reconciliation performed end of each business day