Marginable securities are those that can be used as collateral for a margin loan. Margin loans allow investors to borrow funds from their broker to purchase securities, using their existing securities as collateral.
In the money market, some of the most commonly marginable securities include:
- Treasury bills (T-bills): These are short-term debt securities issued by the US government that have a maturity of less than one year.
- Certificates of deposit (CDs): These are time deposits with fixed interest rates issued by banks or other financial institutions.
- Commercial paper: These are short-term unsecured promissory notes issued by corporations to raise funds for their short-term financing needs.
- Municipal bonds: These are debt securities issued by state and local governments to fund infrastructure projects or other public works.
- Repurchase agreements (repos): These are agreements in which one party sells securities to another party with the promise to buy them back at a later date.
It's important to note that the specific margin requirements and eligibility criteria for each type of money market instrument can vary depending on the broker and the investor's individual circumstances. Investors should always carefully read and understand the terms and conditions of any margin loan or investment agreement before investing.
