CBI to use Repurchase Agreement (Repo) for 1st time

TEHRAN, Oct. 19 (MNA) – In line with the approvals of the Government Economic Coordination Headquarters to develop "open market operations", the CBI is to use the Repurchase Agreement (Repo) for the first time in its history.

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities.

In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price. That small difference in price is the implicit overnight interest rate. Repos are typically used to raise short-term capital.

They are also a common tool of central bank open market operations.

For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

Repurchase agreements are generally considered safe investments because the security in question functions as the collateral.

HJ/TSN2372712

News Code 164917

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