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    1. Repurchase and Reverse Repurchase Transactions  
        - Fedpoints - Federal Reserve Bank of New York 
        reverse repos are conducted with primary  
        dealers via auction. In a repo, dealers bid on  
        borrowing money versus various types of general  
        collateral. In a reverse repo, dealers offer  
        interest rates at which they would lend money  
        to the Fed versus the Fed’s Treasury general  
        collateral, typically Treasury 
  
     2. Liquidity and Leverage 
        Panel. A:. US$. Billions. Mean. Std. Dev. Min.  
        Max. Obs. Reverse. Repos. and. other.  
        Collateralized. Lending. 1708. 1026. 397. 4227.  
        926. Reverse. Repos. 1252. 702. 332. 2972. 926.  
        Repos. and. other. Collateralized. Borrowing.  
        1792. 1087. 382. 4616. 
  
     3. Liquidity and Leverage . Tobias Adrian. Federal  
        Reserve Bank of New Y... 
        Panel. A:. US$. Billions. Mean. Std. Dev. Min.  
        Max. Obs. Reverse. Repos. and. other.  
        Collateralized. Lending. 1712. 1010. 382. 4076.  
        896. Reverse. Repos. 1655. 1008. 369. 4040.  
        896. Repos. and. other. Collateralized.  
        Borrowing. 1636. 961. 397. 3896. 
  
     4. The Evolution of Repo Contracting Conventions  
        in the 1980s 
        55). Some market participants borrowed  
        securities on reverse repurchase agreements as  
        early as the late 1950s (U.S. Treasury and  
        Federal Reserve System 1959, p. 38). FRBNY  
        Economic Policy Review / May 2006 31 Page 6 Box  
        2 Short Sales and Special Collateral Reverse  
        Repos Suppose that a dealer has a long 
  
     5. The Repurchase Agreement Refined: GCF Repo -  
        Federal Reserve Bank of New York 
        described below), the reversals constitute  
        final settlement of GCF Repos terminating that  
        day. The morning reversals are important to  
        dealers borrowing on continuing term RPs  
        because they restore a borrower’s control over  
        its collateral, giving it access to securities  
        that might be needed to settle 
  
     6. The Repurchase Agreement Refined: GCF Repo 
        and is a net borrower on GCF Repo on all  
        Treasury issues has until 4:30 p.m. to deliver  
        Treasury bills, notes, and/or bonds of it s  
        choosing to an FICC account at JPMC against  
        pay- The morning reversals [of GCF Repos] are  
        important to dealers borrowing on continuing  
        term RPs because they restore a borrower's 
  
     7. Open Market Operation - Fedpoints - Federal  
        Reserve Bank of New York 
        system will need to have balances extinguished,  
        in which case the Desk will conduct a reverse  
        repo. Reverse repo transactions are the  
        opposite of RPs. Instead of lending money to  
        the dealers, the desk borrows money from the  
        dealers versus collateral from the System Open  
        Market Account. Repo and reverse 
  
     8. What Financing Data Reveal about Dealer  
        Leverage - Federal Reserve Bank of New York 
        For instance, if a dealer enters into a repo,  
        in which it borrows funds and provides  
        securities as collateral, it would report  
        securities out. If a dealer enters into a  
        security-for-security transaction, it would  
        report both securities in and securities out.  
        In addition, repos and reverse repos 
  
     9. Trading Risk and Volatility in Interest Rate  
        Swap Spreads 
        the sum of their repo and reverse repo  
        positions).b Repo interest rate Deviation of  
        repo rate from its forecast value. Dvt_r = r ­  
        r f , where rf is the forecast of the normal  
        value of the repo rate. (a) Five-year rates are  
        used instead of ten-year rates because of the  
        higher frequency of specialness 
  
    10. What Financing Data Reveal about Dealer Leverage 
        a marked rise in dealer leverage in recent  
        years. This interpretation is typically based  
        on an analysis limited to the repo data. In  
        particular, net repo financing--the net amount  
        of f unds primary dealers borrow through  
        fixed-income security repos--is calculated as  
        repos minus reverse repos. The measure 
 

Results 1 - 10 of 1111 Next
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Repurchase and Reverse Repurchase Transactions

     • The Fed uses repurchase agreements, also called  
        "RPs" or "repos", to make collateralized loans  
        to primary dealers. In a reverse repo or “RRP”,  
        the Fed borrows money from primary dealers. The  
        typical term of these operations is overnight,  
        but the Fed can conduct these operations with  
        terms out to 65 business days. 

     • The Fed uses these two types of transactions to  
        offset temporary swings in bank reserves; a  
        repo temporarily adds reserve balances to the  
        banking system, while reverse repos temporarily  
        drains balances from the system. 

     • Repos and reverse repos are conducted with  
        primary dealers via auction. In a repo, dealers  
        bid on borrowing money versus various types of  
        general collateral. In a reverse repo, dealers  
        offer interest rates at which they would lend  
        money to the Fed versus the Fed’s Treasury  
        general collateral, typically Treasury bills. 

Among the tools used by the Federal Reserve System to achieve its monetary policy objectives is the temporary addition or subtraction of reserve balances via repurchase and reverse repurchase agreements in the open market. These operations have a short-term, self-reversing effect on bank reserves.

Repurchase agreements are made at the initiative of the trading desk at the New York Fed (“the Desk”). The Desk implements monetary policy for the Federal Reserve System at the behest of the Federal Open Market Committee (FOMC).

Repos are the most common form of temporary open market operation, and are used to temporarily add balances to those already in the system as a result of securities purchased and held in the SOMA portfolio. The SOMA portfolio is grown via securities purchases, also called permanent open market operations.

RPs and reverse repurchase transactions are particularly useful in offsetting temporary swings in the level of bank reserves caused by such volatile factors as float, currency held by the public and Treasury deposits at Federal Reserve Banks.

While the mechanics of a repo involve buying and then reselling securities at a set price and a set time, at its financial essence, a repo is a collateralized loan. Fed repos can be conducted for terms anywhere from one to 65 business days. They are usually overnight, though rarely longer than 14 days.

There are two main types of settlement methods for repos: triparty and “delivery vs payment” or DVP. Fed repos are done via triparty settlement, which means that the Fed and the primary dealers use a triparty agent to manage the collateral. In a triparty repo, both parties to the repo must have cash and collateral accounts at the same triparty agent, which is by definition also a clearing bank. The triparty agent will ensure that collateral pledged is sufficient and meets eligibility requirements, and all parties agree to use collateral prices supplied by the triparty agent.

The Desk selects winning propositions on a competitive basis. Each dealer is requested to present the rates they are willing to pay for the agreements versus various types of collateral. The three types of general collateral, or GC, the Fed accepts are marketable U.S. Treasury securities (including STRIPS and TIPS), certain direct U.S. agency obligations, and certain agency “pass-throughs” (or Mortgage Backed Securities, often called MBS).

The significance of the “GC” designation on the collateral is that GC collateral is fungible. That is, the Fed is not looking for specific securities; rather it is looking for any of the eligible securities that do not have scarcity value. As such there are a number of securities that would satisfy the requirements, and neither the dealer nor the Fed needs to know which specific security or securities are going to ultimately be pledged to a winning proposition. The Desk establishes relative values across the three collateral types, and then uses these values to selects the best bids presented.

The New York Fed makes payment for the securities by crediting the reserve account of the dealer's triparty agent, a commercial bank. This act of crediting the bank's account actually creates reserve balances. When the repo matures, the dealer returns the loan plus interest, and the Fed returns the collateral. The return of funds to the Fed extinguishes the reserves that were originally created by the repo.

The collateral pledged by dealers towards the repo has a “haircut” applied, which means they are valued at slightly less than market value. This haircut reflects the underlying risk of the collateral and protects the Fed against a change in its value. Haircuts are therefore specific to classes of collateral. For example, a U.S. Treasury bill might have one haircut rate, while an agency coupon might have a different haircut.

Fed reverse repos are settled DVP, where securities are moved against simultaneous payment. In this case, the Fed sends collateral to the dealers’ clearing bank, which triggers a simultaneous movement of money against the security. At this point, reserve balances are extinguished. When the deal matures, the dealer sends the collateral back to the Fed DVP, which triggers the simultaneous return of the dealer’s funds. This act re-creates the reserve balances that were extinguished on the front leg of the transaction.

Market participants frequently use repurchase agreements and RRP transactions to acquire funds or put funds to use for short periods. However, transactions not involving the central bank do not affect total reserves in the banking system.

August 2007