repurchase agreement

re·​pur·​chase agreement | \ (ˌ)rē-ˈpər-chəs- How to pronounce repurchase agreement (audio) \

Definition of repurchase agreement

: a contract giving the seller of securities (such as treasury bills) the right to repurchase after a stated period and the buyer the right to retain interest earnings

Examples of repurchase agreement in a Sentence

Recent Examples on the Web

The rate on overnight repurchase agreements hit 5% on Monday, according to Refinitiv data. Matt Egan, CNN, "A crack just emerged in the financial markets: The NY Fed spends $53 billion to rescue the overnight lending market," 17 Sep. 2019 These trades are known as overnight repurchase agreements, or repos. Daniel Kruger, WSJ, "Fed Group Proposes Adjustable-Rate Mortgages Using Libor Replacement," 11 July 2019 The New York Fed’s new rate is based on the rates in the active market for a kind of short term-loan known as a repurchase agreement, or repo, which uses Treasury securities as collateral. The New York Times, New York Times, "White House to List Chinese Products Facing Tariffs and the March Jobs Report," 1 Apr. 2018 Following an extensive consultation, the ARRC recommended replacing Libor with a rate derived from short-term loans known as repurchase agreements, backed by Treasury securities as collateral. Jerome Powell And J. Christopher Giancarlo, WSJ, "How to Fix Libor Pains," 3 Aug. 2017 That would allow the securities to be cleared in the $1.8 trillion market for tri-party repurchase agreements. Liz Mccormick,, "Technical or Not, Debt-Limit Default Spells Treasuries Nightmare," 5 Sep. 2017 Take-up at the System's overnight reverse repurchase agreement facility averaged somewhat less than in the previous period. Luke Kawa,, "Inside the Fed’s September Meeting: The Annotated Minutes," 11 Oct. 2017 These could come from offsetting different kinds of trades, for example, derivatives against sale-and-repurchase agreements. Paul J. Davies, WSJ, "Why Is Everyone Making a Stink About Clearing?," 11 July 2017

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'repurchase agreement.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of repurchase agreement

1891, in the meaning defined above

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Dictionary Entries near repurchase agreement


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repurchase agreement




Statistics for repurchase agreement

Last Updated

27 Sep 2019

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Time Traveler for repurchase agreement

The first known use of repurchase agreement was in 1891

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More Definitions for repurchase agreement

repurchase agreement


Financial Definition of repurchase agreement

What It Is

A repurchase agreement is the sale of a security combined with an agreement to repurchase the same security at a higher price at a future date.  It is also referred to as a "repo."

How It Works

For example, trader A may sell a specific security to trader B for a set price and agree to buy back the security for a specified amount at a later date.  In actuality, however, the sale is not a real sale, but rather a loan, secured by the security.  As with collateralized loans, the security being used as collateral is "held" by trader B (in case trader A defaults and does not repayment the amount to trader A.)  The incremental amount to be repaid by trader A to repurchase the security is the amount of "interest" earned on the loan by trader B.

Repos are usually very short term transactions, mostly with overnight terms although some extend for a period of years.  For short term repos, the risks are very low.  For longer long repos, with the possibility of fluctuations in the market, collateral risk is much higher.

Why It Matters

Repurchase agreements have grown into a very large portion of the money markets, fueling the growth of short-term markets for mutual funds in trading government-backed securities, such as T-bills. Indeed, the Treasury, through its Federal Reserve bank banking system, is a large purchaser of repos, providing important liquidity for short-term market traders.

Source: Investing Answers

repurchase agreement


Legal Definition of repurchase agreement

: a contract giving the seller of securities (as Treasury bills) the right to repurchase after a stated period and the buyer the right to retain interest earnings

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