Source: Bank of England Quarterly Bulletin, Autumn 2001

Chapters 3 and 4 cover short-term debt instruments issued by some of the largest borrowers in the world-the U.S. Treasury and U.S. fed- eral agencies. U.S.

Treasury bills are considered among the safest and most liquid securities in the money market. Treasury bill yields serve as benchmark short-term interest rates for markets around the world. Agency securities are not typically backed by the full faith and credit of the U.S. government, as is the case with Treasury bills. However, short- term agency securities are considered safer than other money market instruments except U.S. Treasury bills.

Another large borrower of short-term funds is a corporation using instruments such as commercial paper or short-term medium term notes. These instruments are the subject of Chapter 5. Commercial paper is a short-term unsecured promissory note that is issued in the open market and represents the obligation of the issuing corporation. An important innovation in this market is asset-backed commercial paper. Asset-backed commercial paper is commercial paper issued by either corporations or large financial institutions through a bankruptcy- remote special purpose corporation and is usually issued to finance the purchase of receivables and other similar assets. In contrast, a medium-

Introduction term note is a corporate debt instrument with the unique characteristic