Core Liquidity

Think: financial instruments that are most liquid. By liquid, we mean that, with ease, we can turn them into straight cash. Core liquidity refers to these assets held by banks. It includes instruments like money market mutual funds, T-bonds (be careful, bills and notes have different maturity structures and are not the same), and obviously cash itself.

The idea of core liquidity really brings that old Christmas movie to mind: It’s a Wonderful Life. Every client goes into the bank and wants to empty his or her account...and of course the ‘ol Savings and Loan can't support that withdrawal volume, because they had no core liquidity. Not even Clarence can help you now.