Repurchase Agreement

  • 11 kwietnia 2021
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If the Fed wants to tighten the money supply, hungry for liquidity, it sells the bonds to commercial banks through a pension purchase contract or a brief repot. Later, they will buy back the securities through a reverse pension and return money to the system. With regard to securities lending, the purpose is to temporarily maintain the guarantee for other purposes, such as short-position hedging or use in complex financial structures. Securities are generally borrowed for a royalty, and securities borrowing transactions are subject to other types of legal agreements than deposits. The cash paid on the initial sale of securities and the money paid at the time of the repurchase depend on the value and type of security associated with the pension. In the case of a loan. B, both values must take into account the own price and the value of the interest accrued on the loan. If the purpose of the repoe is to borrow money, it is not technically a loan: the ownership of the securities in question actually comes and goes between the parties involved. Nevertheless, these are very short-term transactions with a guarantee of redemption. A sale/buy-back is the cash sale and pre-line repurchase of a security. These are two separate pure elements of the cash market, one for settlement in advance.

The futures price is set against the spot price in order to obtain a market return. The basic motivation of Sell/Buybacks is generally the same as in the case of a conventional repo (i.e. the attempt to take advantage of the lower financing rates generally available for secured loans, unlike unsecured loans). The profitability of the transaction is also similar, with interest on the money borrowed from the sale/purchase being implicitly included in the difference between the sale price and the purchase price. As a result, pension and pension agreements are called secured loans, because a group of securities – usually U.S. government bonds – insures the short-term credit contract (as collateral). Thus, in financial statements and balance sheets, repurchase agreements are generally recorded as credits in the debt or deficit column. Under a pension contract, the Federal Reserve (Fed) buys U.S. Treasury bonds, U.S. agency securities or mortgage-backed securities from a primary trader who agrees to buy them back within one to seven days; an inverted deposit is the opposite.

This is how the Fed describes these transactions from the perspective of the counterparty and not from its own point of view. A pension purchase contract (repo) is a form of short-term borrowing for government bond traders. In the case of a repot, a trader sells government bonds to investors, usually overnight, and buys them back the next day at a slightly higher price. This small price difference is the implied day-to-day rate. Deposits are generally used to obtain short-term capital. They are also a common instrument of central bank open market operations. A buy-back facility („buyout facility”) is a financing agreement under which a bank or other credit institution (a „buyer”) provides liquidity to a business that acquires or acquires real estate assets (a „seller”) by acquiring such assets with simultaneous agreement that the seller repurchases the assets at a later date. A repurchase facility can be used to aggregate mortgages or other eligible assets created by a seller prior to a securitization takeover, or a repurchase facility could be used to provide financing to a static pool up to the mortgage maturity date. The parts of the repurchase and reverse-repurchase agreement are defined and agreed upon at the beginning of the agreement.

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