Money Market
Marché monétaire in French
Quick definition
The money market is the market for high-quality debt maturing in under a year: treasury bills, short-term bank and government paper, and commercial paper. It is where governments, banks and corporations borrow briefly and savers park cash safely.
The market for short and safe
Every economy needs a place to borrow and lend for weeks or months rather than years, and that place is the money market. The instruments share three traits: short terms (under a year), high credit quality, and prices that barely move. The core holdings are treasury bills issued by the federal and provincial governments, short-term paper issued by banks, and commercial paper, the short-term IOUs of large corporations.
Most money market paper works like a T-bill: it pays no interest along the way. You buy at a discount and receive full face value at maturity, and that discount is the yield.
Money market funds
Individual money market instruments trade in large denominations, so most people who want this exposure buy a money market fund: a mutual fund or ETF that holds a rolling basket of this short-term paper. Because everything in the basket matures within months and gets replaced at current rates, the fund's yield tracks the Bank of Canada policy rate closely, rising within weeks of hikes and falling just as quickly after cuts.
Safe, but not insured: the honest print
A money market fund is an investment, not a deposit, and the distinction matters. Deposits in a HISA at a member institution are insured by CDIC up to its limits; money market fund units are not CDIC-insured, full stop. What protects you instead is the quality and shortness of what the fund holds.
Fund managers also aim to keep the unit price stable, often around a fixed value such as $10, and in normal markets they succeed so consistently that the stability looks guaranteed. It is not: it is an objective. In rare episodes of severe market stress, money market funds elsewhere have briefly failed to hold their value. The risk is small, but calling it zero would be wrong.
Where money market instruments fit
The money market shines for parking large sums: corporate treasuries managing payroll cash, investors holding the proceeds of a house or business sale, and the cash slice of an investment portfolio, where a money market fund keeps brokerage cash earning close to the policy rate instead of nothing.
For most households, though, an honest line is in order: a HISA or a cashable GIC does the same job more simply, often at a comparable rate, with CDIC insurance included. The money market earns its place when the amounts are large, the money lives at a brokerage, or rate certainty across an exact term matters.
In Canada
Canada's money market is anchored by Government of Canada T-bills, auctioned every two weeks, with provincial T-bills and bank paper filling out the market. The plumbing has been modernizing: the bankers' acceptance, a bank-guaranteed instrument that anchored the Canadian money market for decades, has been wound down in recent years in favour of paper tied to CORRA, Canada's overnight benchmark rate. For fund investors the transition changed the labels inside the basket far more than the experience of holding it.
Worked example
Lauren sells her condo and will not buy again for about eight months. The $300,000 in proceeds is triple the CDIC limit at any one institution, so instead of splitting deposits three ways, she buys a money market fund at her brokerage that holds federal and provincial T-bills. The yield sits near the policy rate, the money is one trade away whenever she finds the right house, and the credit backing is largely the Government of Canada itself. Her brother in the same situation with $40,000 simply uses a HISA: same job, simpler tool, insured.
Related terms
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated August 2026