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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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 ?
"The PBOC has fully estimated and prepared for the various factors that will affect liquidity in June, and will flexibly use reverse repurchase agreements and the medium-term lending facility in accordance with the cash supply-and-demand situation of the market," it added.
Computed to include reverse repurchase agreements entered into by banks,credit growth decelerated to 14.4 percent in January from the revised 14.8 percent in the previous month.
The funds may accept collateral in respect of reverse repurchase agreements that are denominated in other currencies.
The rate for seven-day reverse repurchase agreements remained at 2.55 percent, while the 14-day rate was at 2.70 per cent.
The year-on-year decrease in expenditures was due mainly to the drop in interest expense on overnight deposit facilities and reverse repurchase agreements.
Expenditures were lower at P66.9 billion from P71.2 billion from the decline in interest expense on overnight deposit facilities and reverse repurchase agreements, noted the central bank.
Excludes Federal funds sold to, reverse repurchase agreements (RPs) with, and loans to commercial banks in the United States.
The People's Bank of China (PBOC) conducted 120 billion yuan of seven-day reverse repurchase agreements (repo), a process in which central banks purchase securities from banks with an agreement to resell them in the future.
The People's Bank of China injected CNY 440 billion (USD 67 billion) into the financial system through reverse repurchase agreements, the biggest one-day offering since February 2013.
* Reverse repurchase agreements (reverse repo)/securities borrowing generally reflects a cash outlay and a receipt of a financial instrument as collateral, such as a security.
Another question policymakers need to answer in coming months is whether a test facility for conducting reverse repurchase agreements, which temporarily drain cash from the financial system and could help control market rates when the Fed tightens monetary policy, will be adopted as a key tool.