reverse repurchase agreement

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Reverse Repurchase Agreement

A practice in which a bank or other financial institution buys securities or another asset with the proviso that it will resell these same securities or asset to the same seller for an agreed-upon price on a certain day (often the next day). Investors and financial institutions do this in order to raise short-term capital. Indeed, it is the equivalent of a short-term loan with the securities or asset serving as collateral. A reverse repurchase agreement is the same as a repurchase agreement, but from the perspective of the buyer rather than the seller. It is also called a matched sale transaction or simply a reverse.
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reverse repurchase agreement

The purchase of an asset with a simultaneous agreement to resell the asset on a given date at a specified price. The result is simply a loan at a prescribed rate for a predetermined period while holding the asset as collateral. Also called reverse. Compare repurchase agreement.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
dollars) from the financial system Wednesday, with more reverse repos maturing than conducted.
Overnight reverse repos totaled $2.1 B yesterday with 3 counterparties, versus $1.3 B with 4 counterparties on Wednesday (and was $41.8 B on December 31).
Analysts say the central bank prefers mid- to long-term policy tools over reverse repos, which boost liquidity in the banking system within a short period of time, as it faces a major task in reducing the costs of long-term financing.
The central bank conducted CNY160bn of seven-day reverse repos, CNY130bn of 28-day reverse repos and CNY60bn of 63-day reverse repos.
The reverse repos were priced to yield 2.25 percent, unchanged from Monday's injection of 65 billion yuan, according to a PBOC statement.
As described above, the clearing banks receive instructions from FICC to settle dealers' net positions, where a net position is the difference between the value of repos and the value of reverse repos that a dealer has traded for a particular collateral class.
The changes, involving reverse repos and derivatives, reduce the assets included in the calculation and make it easier for them to meet leverage ratio requirements, depending on the final rules adopted by national regulators.
The central bank injected a record high of CNY 395 billion (USD 62.7 billion) into the financial system via reverse repos in order to ease a cash squeeze at the end of the month, the central bank said in a statement carried by Xinhua.
The volume of the NY Fed's reverse repos has declined too, totaling $2.537 B yesterday with 9 counterparties, versus $2.81 B Tuesday (9 counterparties), and compares to the term repo from December 31 at $41.8 B with 17 counterparties.
Global Banking News-June 16, 2017--China's central bank keeps reverse repos rates unchanged