Repurchase Agreement Treasury
With regard to the lending of securities, the temporary obtaining of the title is intended for other purposes, such as. B hedging short positions or use in complex financial structures. Securities are generally lent for a fee and securities lending transactions are subject to other types of legal agreements than rest. While a retirement transaction involves a sale of assets, it is treated as a loan for tax and accounting purposes. When public central banks buy securities from private banks, they do so at a reduced interest rate called the repo rate. Like policy rates, repo rates are set by central banks. The repo interest rate system allows governments to control the money supply within economies by increasing or reducing available resources. A cut in repo rates encourages banks to sell securities for cash to the government. This increases the money supply available to the general economy. Conversely, by raising repo rates, central banks can effectively reduce the money supply by preventing banks from reselling these securities. 2) Cash payable when buying back the security The instruments used by the Federal Reserve system to achieve its monetary policy objectives are the temporary addition or deduction of reserve assets through reverse reverse repo and retirement operations in the open market. These operations have short-term and self-insubstring effects on banks` reserves. Central counterparties and reverse retirement operations are particularly useful for offsetting temporary fluctuations in bank reserves due to volatile factors such as float, publicly held money, and Treasury deposits with Federal Reserve Banks. As in many other corners of finance, pensions include terminology that is not common elsewhere. One of the most common terms in the repo area is "leg". There are different types of legs: for example, the part of the retirement transaction in which the security is originally sold is sometimes referred to as the "starting leg", while the next redemption is the "narrow part". These terms are sometimes replaced by "near leg" or "distant leg". In the period close to a repo operation, the title is sold. On the other hand, it is redeemed. Market participants often use retirement and EIA operations to acquire funds or use funds for short periods. However, operations in which the central bank is not involved do not affect the overall reserves of the banking system. In case of positive interest, it can be considered that the repurchase price PF is higher than the initial selling price PN. There is also a risk that the securities in question will be amortized before the maturity date, in which case the lender may lose money in the transaction. This time risk is the reason why the shortest trades during redemptions generate the most favorable returns. In a repo transaction, a trader sells securities to a counterparty with the agreement to buy them back later at a higher price. The trader raises short-term funds at an advantageous interest rate with low risk of loss. The transaction is concluded by a reverse repo. In other words, the counterparty resold them to the trader as agreed. Retreats are usually short-term transactions, often literally overnight. However, some contracts are open and do not have a fixed expiry date, but the reverse transaction is usually done within one year. Although the transaction is similar to a loan and its economic impact is similar to a credit, the terminology differs from that of credit: the seller legally buys the securities from the buyer at the end of the loan period. However, one of the essential aspects of rest is that they are legally recognised as a single transaction (significant in the event of the counterparty`s insolvency) and not as a sale and redemption for tax purposes.. . . . 続きを読む