Difference between Money Market and Capital Market

Difference between Money Market and Capital Market 

The money market and the capital market are two distinct segments of the financial market that deal with different financial instruments and serve different purposes.

The money market is a market for short-term borrowing and lending of financial instruments with high liquidity and low credit risk. It deals with instruments such as Treasury bills, commercial papers, and certificates of deposit, which have maturities ranging from overnight to one year. The primary aim of the money market is to provide short-term funding for governments, financial institutions, and corporations.

The capital market, on the other hand, is a market for long-term borrowing and lending, where long-term debt and equity securities are bought and sold. It deals with instruments such as bonds, stocks, and mutual funds, which have maturities ranging from several years to several decades. The primary aim of the capital market is to provide long-term funding for companies to finance their growth and expansion.

In summary, the money market is focused on short-term financing needs, while the capital market is focused on long-term financing needs.