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Bankers Acceptances -Cities can invest in bankers acceptances of United States Banks eligible <br />• for purchase by the Federal Reserve System. These instruments typically are created from a <br />letter of credit issued in a foreign trade transaction. Maturities on Bankers Acceptances run from <br />30 to 180 days, which the 90-day acceptance the standard. Historically, Bankers Acceptances <br />have been a very safe investment vehicle. <br />Commercial Paper -Cities are authorized to invest in Commercial Paper issued by United States <br />Corporations or their Canadian Subsidiary, if it is of the highest quality (Al .P 1 or better), and <br />matures in 270 days or less. Commercial Paper is a short term unsecured promissory note. <br />Commercial Paper is issued at a discount, and matures at par. One of the most important factors <br />in determining whether an issuer's commercial paper is worthy, is the nature of the underlying <br />bank line of credit. These credit lines are of four kinds: <br />1. Standard Line Agreements (when activated, converts to a standard bank note at a <br />specific date.) <br />2. Swing Line (issuer may borrow one day and repay the next.) <br />3. Revolving Line (long term flexible line of credit virtually guaranteeing a bank loan at <br />any time upon request by the issuer.) <br />4. Irrevocable Letter of Credit (a Financial institution guarantees unequivocally that <br />funds will be available to redeem the commercial paper upon maturity. This is the most secure <br />• of the four.) <br />Interest Bearin~Deposits (CDs etc. May be interest bearing checking accounts, money market <br />savings account, CDs, and ordinary savings account. Bank or Savings & Loan must be neamed <br />as a depository by the City, and all deposits over the $100,000 Federal insurance must be <br />collateralized. <br />(See separate section on collateralization.) <br />League of Cities -Money Market Fund - An alternative is to use the League of Cities program <br />for the investment of your City's idle funds. An advantage is that you have the benefit of <br />professional management. The League program offers a money market fund as well as the <br />availability of Certificates of Deposit. For more information call 1-800-333-6000, ext. 6423, or <br />(612) 342-6423. <br />Repurchase Agreements -Short term transactions involving the simultaneous sale of securities <br />by the seller to the investor and the agreement by the seller to repurchase at a later date. <br />Overnight Repo -refers to those transactions whereby the repurchase occurs the next day. If <br />properly handled, Repos offer an investment alternative. <br /> <br />7 <br />