Buy-back agreements (English repo = Repurchase Agreement) are short term financing instruments, with a running time of generally no more than three months, frequently even only few days or one night (so-called Overnight Repo). Synonymous ones for this are pension business and/or Repo.

Here net assets - usually securities - are transferred by the owner (pension giver) the pension taker. The pension giver receives for it an agreed upon sum of money. The pension taker is obligated to the return and the pension givers to the cancelling (genuine pension business). The pension giver has to pay the sum of money back including agreed upon interest, received for the fortune articles, with the return.

Repo business is locked particularly between banks, in order to procure itself thereby temporarily liquid means. Securities are sold against money by the borrower to the backer with the agreement to redeem these securities at an agreed upon time plus an interest (Repo rate). Due to the good safety device the interest rate usually is under the Geldmarktzinzsatz. Repo business is to be provided therefore a favorable means around itself temporarily liquid means.

With a Reverse Repo securities with the agreement are bought to sell this later again. The borrower takes up a "besicherten credit", while the backer has thereby a besicherte plant of surplus liquid means. Possible yields of the securities the business are given to the backer at run time as temporary owners of the securities. The yields are considered later in the buy-back price.

Genuine Repo business and Reverse of Repo business are not subject as financing business the increase in value/value added tax. For the demarcation too buy/sell bake - business those compiled internationally Capital Market Association (ICMA) a contract collecting main.

Repo business is accomplished also between the central bank and the private banks, the private banks procures themselves money so at short notice. The European central bank does not accept securities with a Rating for their buy-back agreements or refinancing business of the banks more badly than A (in the designation of standard & Poor's), conditions December 2005. Greece with the worst Rating in the European union has at present a Rating of A, thus still another stage over A.

Repo of the EZB

See also

Security-borrow

Related links

• Eurex Repo - market leaders in Europe

Articles in category "Buy-back agreement"

We found here 23 articles.