Armin Hohenadler

When the Desk conducts open market transactions, it sells securities held on the Open Market Account (SOMA) to eligible RSO counterparties, with the agreement to repurchase the assets on the specified maturity date of the CRR. Therefore, the SOMA portfolio remains the same, given that securities temporarily sold in the context of retirement operations continue to be recorded as assets held by SOMA in accordance with generally accepted accounting principles, but the transaction defers part of the liabilities of the Federal Reserve`s balance sheet from deposits held by custodian banks (also known as bank reserves), to reverse rest while trade has not taken place. Such EIA operations may be due on an overnight due date or for a fixed period of time. Therefore, repurchase agreements and reverse-pension agreements are called secured loans, given that a group of securities – most often US Treasury bonds – insures the short-term credit agreement (as collateral for). Thus, in financial statements and balance sheets, pension agreements are generally recorded as credits in the debt or deficit column. If the Fed wants to tighten the money supply – withdraw money from cash flow – it sells the bonds to commercial banks through a retreat operation, abbreviated repo. Subsequently, they will buy back the securities via a reverse-repo and return money to the system. How many treasury portfolios are available for use in CRR operations? The FOMC informed the desk to conduct overnight RSO operations (ON RSOs) for amounts limited solely by the value of government bonds held directly in SOMA available for such transactions. In determining this value, the desk takes into account several factors, as not all treasury securities held directly in SOMA are available for use in such transactions.

First, some of the government bonds held directly in SOMA are required to conclude reverse retirement transactions in foreign official and international accounts. Second, certain treasury securities are required to support the securities lending operations carried out by the desk. If the desk were to execute an RPR period, the treasury securities used as collateral for ongoing CRR transactions would not be available as collateral for ON-RRP transactions. While the purpose of the repo is to borrow money, it is not technically a loan: ownership of the securities in question actually comes and goes between the parties involved. However, these are very short-term transactions with a guarantee of redemption. The redemption and redemption upside down of the contract are fixed and agreed at the beginning of the operation. Repo is a form of secured loan. A basket of securities is the underlying collateral for the loan. The right to the titles is transferred from the seller to the buyer and reverts to the original owner when the contract is concluded. The most widely used assets in this market are US Treasuries. However, government bonds, agency securities, mortgage securities, corporate bonds or even shares can be used in a retirement transaction.

While a retirement transaction involves a sale of assets, it is treated as a loan for tax and accounting purposes. A reverse repurchase agreement or „Reverse Repo“ is the purchase of securities with the agreement to sell them at a higher price on a given future date. For the party who sells the security (and agrees to buy it back in the future), it is a retirement transaction (PR) or repo; For the party at the other end of the transaction (purchase of the security and acceptance of the sale in the future), this is a Reverse Repurchase Agreement (RRP) or reverse repo. Repurchase agreements have a similar risk profile to any securities loan. In other words, these are relatively safe operations, since they are guaranteed loans, a third of which is usually used as a custodian bank. Pensions (repo or PR) and reverse look operations (RSOs) are two important tools used by many large financial institutions, banks and some businesses….