In financial markets, the term "trading flat" generally refers to a security that is trading at the same price as its previous close. In the case of money market instruments, some of them are designed to trade flat, which means they have a fixed interest rate and their price is not subject to fluctuation based on market conditions.
Examples of money market instruments that trade flat include:
- Certificates of deposit (CDs): CDs are time deposits with fixed interest rates and maturities ranging from a few weeks to several years. Their value remains the same throughout the life of the CD.
- Treasury bills (T-bills): T-bills are short-term debt securities issued by the US government with a maturity of less than one year. They are typically issued at a discount to their face value and their value remains the same until maturity.
- Commercial paper: Commercial paper is a short-term unsecured promissory note issued by corporations to raise funds for their short-term financing needs. They typically have a fixed interest rate and are issued at a discount to their face value.
- Banker's acceptances: Banker's acceptances are short-term debt instruments issued by a bank on behalf of a customer to finance the purchase or sale of goods. They have a fixed interest rate and their value remains the same until maturity.
Overall, money market instruments that trade flat are generally considered to be low-risk investments because they offer a fixed rate of return and are not subject to market fluctuations.
