Money market securities are short-term debt instruments that typically mature in one year or less. They include Treasury bills, commercial paper, certificates of deposit, and repurchase agreements. Governments, banks, and corporations issue these securities to raise cash quickly, and investors buy them for their relative safety and liquidity. As of late April 2026, most money market securities yield roughly 3.5% to 3.8% annually.
How Money Market Securities Work
The basic idea is simple: a borrower needs cash for a short period, so it issues a security that promises to repay the investor, with interest, within days, weeks, or months. Because the time horizon is so short, lenders face less uncertainty than they would with a 10-year bond or a 30-year mortgage. That shorter timeline translates into lower risk for investors, though it also means returns are modest compared to stocks or long-term bonds.
Most money market securities trade in large volumes among banks, corporations, and institutional investors. But individual investors can participate too, either by buying certain securities directly or through money market mutual funds that pool investor money and spread it across dozens of these instruments.
Treasury Bills
Treasury bills, or T-bills, are short-term obligations issued by the U.S. government with maturities ranging from a few days to one year. They carry the largest trading volume and the most active secondary market of any money market instrument. Because they’re backed by the full faith and credit of the federal government, T-bills are generally considered free of default risk, which is why they typically offer the lowest yields among money market securities.
In late April 2026, secondary-market yields on T-bills ranged from about 3.58% for four-week bills to 3.54% for one-year bills. You can buy T-bills directly through a TreasuryDirect account with a minimum purchase of just $100, bidding in $100 increments up to $10 million. When you place a non-competitive bid through TreasuryDirect, you’re guaranteed to receive the amount you want at whatever rate the auction determines. Competitive bids, placed through a bank or broker, let you specify the rate you’ll accept, but there’s no guarantee you’ll win.
Commercial Paper
Commercial paper is a short-term, unsecured promissory note issued by corporations that need a quick cash infusion. “Unsecured” means the note isn’t backed by collateral; investors rely on the issuing company’s creditworthiness. Because of that added risk compared to T-bills, commercial paper pays a slightly higher yield. In late April 2026, three-month nonfinancial commercial paper yielded around 3.63% to 3.75%, while financial commercial paper ran about 3.73% to 3.81%.
Most commercial paper is issued by large, financially stable corporations with strong credit ratings. Maturities are short, often 30 to 270 days. Individual investors rarely buy commercial paper directly because it’s typically sold in large denominations. Instead, most people get exposure to it through money market mutual funds, specifically “prime funds” that focus on corporate debt securities.
Certificates of Deposit
A certificate of deposit is issued by a bank or credit union as evidence that a depositor has locked up a certain amount of money for a set period, usually one to six months in the money market context. At maturity, the bank returns the principal plus interest. CDs offered by banks and credit unions are insured by the FDIC or NCUA for up to $250,000 per depositor, per institution, making them one of the safest money market instruments.
Large-denomination CDs (often $100,000 or more) trade among institutional investors in the secondary market, where they function like any other money market security. Retail investors can buy standard CDs directly from their bank, though withdrawing money before the maturity date usually triggers an early-withdrawal penalty.
Repurchase Agreements
A repurchase agreement, commonly called a “repo,” is essentially a short-term collateralized loan. One party sells securities (usually Treasury bills or other government-backed instruments) to another party and simultaneously agrees to buy them back at a set price on a set date, often the very next day. The difference between the sale price and the repurchase price represents the interest.
Repos are a critical part of the overnight lending market, helping banks and financial institutions manage their day-to-day cash needs. Individual investors don’t typically participate in repos directly, but money market funds use them extensively.
Bankers’ Acceptances
A bankers’ acceptance is a short-term loan guaranteed by a commercial bank. These instruments often arise in international trade: an importer arranges for its bank to guarantee payment to an exporter on a specific date. The acceptance can then be sold at a discount in the secondary market before that date. Like commercial paper, bankers’ acceptances are rarely purchased by individual investors but frequently appear inside money market fund portfolios.
Yields and What Drives Them
Money market yields move closely with the federal funds rate, which is the rate banks charge each other for overnight loans. In late April 2026, the effective federal funds rate sat at 3.64%, and most money market instruments yielded within a narrow band around that figure. When the Federal Reserve raises or lowers its target rate, money market yields follow quickly because the securities mature so fast that new issuances immediately reflect the updated rate.
The spread between different instruments reflects their relative risk. T-bills, with zero default risk, anchor the low end. Commercial paper and other corporate instruments pay a small premium above T-bills to compensate for credit risk. The differences are usually measured in fractions of a percentage point, but they matter when institutions are parking billions of dollars.
Risks to Understand
Money market securities are among the safest investments available, but they aren’t risk-free. Credit risk exists with commercial paper and bankers’ acceptances: if the issuing company or guaranteeing bank runs into financial trouble, you could lose money. Liquidity risk can surface during market stress, when even normally easy-to-sell instruments become hard to unload quickly. The most dramatic example came during the 2008 financial crisis, when the Reserve Primary Fund “broke the buck,” meaning its net asset value dropped below $1 per share. The fund held commercial paper from Lehman Brothers and couldn’t sell its assets fast enough to meet redemption requests, ultimately freezing withdrawals and liquidating.
One important distinction: money market accounts at banks and credit unions are FDIC- or NCUA-insured up to $250,000. Money market mutual funds, which invest in these same securities, do not carry deposit insurance. You’re relying on the quality of the fund’s holdings rather than a government guarantee.
How Individual Investors Access Them
The most straightforward option for individuals is buying T-bills through TreasuryDirect.gov. You need a TreasuryDirect account, a Social Security number, and a linked bank account. The $100 minimum makes this accessible to nearly anyone.
For broader exposure across multiple types of money market securities, a money market mutual fund is the practical choice. These funds are available through most brokerages and come in several flavors: government funds that focus on Treasuries and agency securities, prime funds that hold corporate debt like commercial paper, and tax-exempt funds that invest in state and local government obligations (with interest generally exempt from federal income taxes). Minimum investments vary by fund but often start at $1 to $3,000.
You can also buy CDs directly from your bank or credit union without a brokerage account. For instruments like commercial paper, repos, and bankers’ acceptances, individual access is effectively limited to owning them indirectly through a fund.