InternationalFinancialMarkets——CHaper3(课件发送1最新).ppt

CHAPTER 3 INTERNATIONAL MONEY MARKETS,3.1 An Overview of International Money Markets,3.1.1 Definition and Characters,（1） Definition,The money market is a sub-sector of the fixed income market，consisting of very short-term (one year or less ）financial instruments （debt securities）.,（2） characteristics, The money market is a wholesale market. （open market ）,Most money market securities trade in very high denominations，and so are out of the reach of individual investors.,the Money Market,The easiest way for small investors to gain access to the money market is with money market mutual funds. These funds pool together the assets of thousands of investors in order to buy the money market securities on their behalf. However, some money market instruments, like Treasury bills, may be purchased directly., Money market instruments are relatively more liquid and considered extraordinarily safe., The major players are banks, firms, mutual funds, and large corporate entities. （many participants）,They are extremely conservative, money market securities offer significantly lower returns than most other securities.,CHAPTER 3 INTERNATIONAL MONEY MARKETS,The money market is a dealer market, which means that firms buy and sell securities in their own accounts, at their own risk. Compare this to the stock market where a broker receives commission to acts as an agent, while the investor takes the risk of holding the stock. Another characteristic of a dealer market is the lack of a central trading floor or exchange. Deals are transacted over the phone or through electronic systems., A money market is the typical offboard market.,3.1.2 Definition,the International Money Market,Intangible market in which issuance and transactions of short-term (one year or less ）financial instruments between residents and nonresidents should follow the market mechanism.,CHAPTER 3 INTERNATIONAL MONEY MARKETS,FIGURE 3.1,3.1.2 Building and Development of International Money Markets,（1） Traditional international money markets,CHAPTER 3 INTERNATIONAL MONEY MARKETS,（2）Eurocurrency markets,The Eurocurrency market owes its existence to differences in national financial regulation combined with declining barriers to international capital movements.,The Origins of Supply and Demand for Offshore Banking,CHAPTER 3 INTERNATIONAL MONEY MARKETS,In a sense, a supply of funds to the Eurodollar market was always present. International commodities such as oil, agricultural products, and precious metals were often priced in terms of U.S. dollars. So Europeans held balances in U.S. dollars to execute transactions, to act as a hedge against foreign exchange changes, and to serve as a store of value.,After World War , Canadian, Swiss, and U.K. banks commonly accepted U.S. dollar deposits, which they placed in U.S. money-market instruments through their New York correspondent banks. The innovation came in the mid-1950s when rather than simply return their U.S. dollars to the U.S. money market, these banks elected to lend these funds within Europe to finance foreign trade or other economic projects.,CHAPTER 3 INTERNATIONAL MONEY MARKETS,The supply of U.S. dollars was also enriched by Russians and other Eastern European depositors who at the time were reluctant to hold their U.S. dollars (needed for international trade transactions) in accounts in the United States. Most likely these depositors remembered that Russian-owned dollars balances had been impounded by the Alien Property Custodian during World War.,Rather than risk confiscation, the Russians deposited their dollars in London and Paris with affiliates of state-owned Russian banks. Still another boost to the market came in 1958 with a general relaxation of exchange controls throughout Europe and a return to external convertibility for the British pound. Private individuals could now hold their U.S. dollars earned through international trade rather than being required to sell them to the central bank.,In a sense, too, the demand for funds in the Eurodollars market was always latent. Borrowers will always line up to borrow cheaper funds because, after all, these is no risk to them in doing so. But demand for Eurodollars multiplied after the sterling crisis of 1957, when the Bank of England restricted the use of sterling for financing foreign trade and external loans. British merchant banks responded with a pragmatic solution: use the U.S. dollar, which was not regulated by the Bank of England to conduct these transactions from accounts based in London. Once the advantage of this approach was evident, European banks began to actively solicit U.S. dollar deposits., Onshore Banking Regulations Boost the Offshore Market,CHAPTER 3 INTERNATIONAL MONEY MARKETS,Banking regulations in the United States helped to serve up a fresh, continuing supply of funds to the Eurodollars market. Under regulation Q, the Federal Reserve established ceilings on the interest rate that banks could pay on deposits of various sizes and maturities.,At about the same time, other U.S. regulations helped to bolster the demand for Eurodollar loans. Responding to the undesired buildup of dollars overseas (dollars that the United States was obliged to convert into gold at 35 per ounce), the United States adopted the interest equalization tax (IET) in 1963.,CHAPTER 3 INTERNATIONAL MONEY MARKETS,Finding that the IET was ineffective in stopping the capital outflow, other U.S. regulations were imposed. The so-called Foreign Credit Restraint Program (voluntary in 1965 and mandatory in 1968) set specific limits on the volume of bank lending that U.S. banks could conduct with foreigners. Foreign subsidiaries of U.S. multinational firms were included in the “foreign” classification.,European governments also experimented with capital controls during this period, which similarly helped to promote the non-dollar segments of the Eurocurrency market. In the early 1970s, the Bundesbank required foreigners with onshore DM accounts to place a fraction of their funds i