Near Monies June 2004 (Billions)
Component		Amount
Savings Near Monies		$4,957.5
	Savings Deposits and Money Market Deposits	3,408.3
	Small Denomination Time Deposits	792.2
	Money Market Mutual Funds	757.0
Institutional Investment Near Monies		3,000.3
	Institutional Money Market Mutual Funds	1,112.2
	Large-Denomination Time Deposits	1,014.3
	Repurchase Agreements	535.8
	Eurodollars	338.0

Near monies come in two varieties that reflect the relative degree of liquidity and the use of the financial asset.

• Savings Near Monies: These near monies are the most liquid nonmoney assets available. They are easily and quickly converted to currency and checkable deposits. Saving near monies, as the name suggests, are primary used by the household sector as savings. Households use of these near monies as a place to "store" future spending, to earn a little interest, but primarily to maintain liquidity. The four types of savings near monies added to M1 to obtain M2 are savings deposits, money market deposits, certificates of deposit, and money market mutual funds.


• Institution Investment Near Monies: These near monies are extremely liquid, but not quite as liquid as the savings near monies. Institutional investment near monies are used by businesses, banks, and other organizations as short-term investments. Institutions use these near monies as short-term investments, which generate and interest rate, but which also maintain a fair amount of liquidity. The investors want quick, easy access to the funds, but they still want to earn some interest. The four types of institutional investment near monies added to M2 to obtain M3 are institutional money market mutual refunds, large-denomination certificates of deposit, repurchase agreements, and Eurodollars.

Savings Near Monies

• Savings Deposits: These are bank deposits held in standard, interest-paying savings accounts at traditional commercial banks and other depository thrift institutions (credit unions, savings and loan associations, and mutual savings banks). The interest rates paid on savings deposits are generally less than other banks accounts. These deposits are easily and quickly withdrawn as cash or transferred into checking accounts, making them among the most liquid nonmoney deposits available.


• Money Market Deposits: These are bank deposits in accounts that pay higher interest rates than savings accounts and which have limited check writing capability. While checks written on these accounts work just like standard checks, check writing is usually limited to a few checks per month (say 3 to 5) and/or a minimum amount per check (say $250 per check).


• Certificates of Deposit: These are bank deposits in accounts that pay higher interest rates than savings accounts but with restrictions on the minimum amount of the deposit and the length of time before the deposit can be withdrawn. Originally the depositor received an actual certificate (a piece of paper) specifying the terms of the deposit, length of time and interest rate paid. Now, like other accounts, this information is stored in an electronic database.


• Money Market Mutual Funds: These are deposits with nonbank mutual fund companies that are similar to money market bank deposits. They also pay higher interest rates than savings accounts and have limited check writing options. Money market mutual funds used for individual retirement accounts (IRA) or Keough accounts are not included.

Institution Investment Near Monies

• Institutional Money Market Mutual Funds: These are deposits with nonbank mutual fund companies that are typically owned by institutions (rather than consumers). More specifically they are money market mutual funds with a minimum initial deposit of $50,000.


• Large-Denomination Certificates of Deposit: These are certificates of deposits issued by banks with a minimum deposit of $100,000. Such certificates of deposits also tend to be owned by businesses and other institutions, rather than consumers.


• Repurchase Agreements: These are short-term transactions in which a financial asset is sold, then automatically repurchased after a specified time (often overnight). The difference between the sale price and repurchase price is the interest payment on this short-term loan. Overnight repurchase agreements are commonly used by banks to generate interest on business checking accounts (which cannot legally receive interest payments).


• Eurodollars: In general, these are deposits in one bank that are designated in the currency of a foreign bank. The "Eurodollar" term arose because these deposits were originally in European banks and denominated in U.S. dollars. In particular, the Eurodollar deposits included in M3 are those held by U.S. residents at banks Britain and Canada.