1.1.8.5 Certificates of Deposit (CDs)
CDs are one of the major instruments of the money market sector, which includes T Bills, commercial paper, and banker’s acceptances. A certificate of deposit is negotiable security issued by commercial banks against money deposited over a period of time. The value of CDs varies depending on the amount of deposit and maturity.
Included in the category of certificates of deposit are small issues that are not transferable and therefore non-negotiable. This form of CD, usually $10,000 in value, and sometimes with a life of two years or more, is advertised by many banks to attract the retail investors. However, because these are not tradable, they are not part of the negotiable CD market.
Parent topic: Fixed Income Securities