Repos are a common secured money market transaction where the Desk purchases securities from a counterparty subject to an agreement to resell the securities at a later date. A repo transaction is economically similar to a loan collateralized by securities and temporarily increases the supply of reserve balances in the banking system.
Conversely, in a reverse repo transaction, the Desk sells securities to a counterparty subject to an agreement to repurchase the securities at a later date. A reverse repo is economically similar to borrowing collateralized by securities and temporarily reduces the supply of reserve balances in the banking system.
To support control over the level of the federal funds rate, the FOMC has directed the Desk to conduct repo and reverse repo operations. Overnight Reverse Repo (ON RRP) operations limit downward pressure and help provide a floor under overnight interest rates by providing an alternative investment for a broad base of money market investors when rates fall below the interest on reserve balances (IORB) rate. Standing Repo (SRP) operations limit upward pressure and help provide a ceiling on money market rates. The Desk generally conducts both ON RRP and SRP operations each business day.
The Desk can also conduct unscheduled repo or reverse repo operations as needed to maintain the fed funds rate within the target range, in accordance with the FOMC’s directive.
In addition to these operations, the New York Fed executes repo and reverse repo transactions with its foreign and international monetary authorities (FIMA) customers. Additional information on pooled foreign overnight reverse repo transactions and the standing FIMA Repo Facility is available here.
Overnight reverse repo operations support monetary policy implementation and smooth market functioning. Overnight reverse repo operations are designed to limit downward pressure and help provide a floor under overnight money market rates by offering a broad range of financial institutions that are ineligible to earn IORB an alternative risk-free investment option.
The Desk conducts ON RRP operations each business day at a pre-announced offering rate set by the FOMC. U.S. Treasury securities held in the System Open Market Account (SOMA) portfolio are used to settle transactions. Overnight reverse repo counterparties include primary dealers, banks, money market mutual funds, and government sponsored enterprises. More information on the ON RRP can be found in Frequently Asked Questions and results of the Desk’s RRP operations is available here. Information on the primary dealers is available here.
Standing repo operations support monetary policy implementation and smooth market functioning. Standing repo operations are designed to limit upward pressure and help provide a ceiling on money market rates.
The Desk conducts overnight standing repo operations each business day at a pre-announced rate set by the FOMC. Treasury, agency debt, and agency mortgage-backed securities are eligible to settle transactions. Standing repo counterparties include primary dealers and eligible depository institutions. More information on standing repo can be found in Frequently Asked Questions and results of the Desk’s repo operations is available here.
