If interest rates are positive, the pf redemption price should be higher than the original PN selling price. Once the actual interest rate is calculated, a comparison between the interest rate and other types of financing will show whether the pension contract is a good deal or not. In general, pension transactions offer better terms than money market cash loan agreements as a secure form of lending. From a reseat member`s perspective, the agreement can also generate additional revenue from excess cash reserves. A pension contract (repo) is a short-term guaranteed credit: one party sells securities to another and agrees to buy them back at a higher price at a later price. The securities serve as collateral. The difference between the initial price of the securities and their redemption price is that of the interest paid on the loan called the pension rate. A decisive calculation in each repurchase agreement is the implied interest rate. If the interest rate is not favourable, a reannument agreement may not be the most effective way to access cash in the short term. A formula that can be used to calculate the real interest rate is below: re boarding operations are carried out in three forms: indicated delivery, tri-party, and held in detention (where the “selling” party maintains the guarantee for the duration of the pension).

The third form (Hold-in-custody) is quite rare, especially in development-oriented markets, due in part to the risk that the seller may intervene before the transaction is completed and that the buyer will not be able to recover the guarantees issued as collateral for the transaction. The first form – the indicated delivery – requires the delivery of a predetermined loan at the beginning and maturity of the contract. Tri-Party is essentially a form of trading basket and allows a wider range of instruments in the basket or pool. In the case of a tripartite repurchase transaction, a third-party agent or bank is placed between the “seller” and the buyer. The third party retains control of the securities that are the subject of the agreement and processes payments made by the “seller” to the buyer. The buy-back contract, or “repo,” the market is an opaque but important part of the financial system, which has recently attracted increasing attention. On average, $2 trillion to $4 trillion in pension transactions are traded every day — guaranteed short-term loans. But how does the pension market work, and what about it? From the buyer`s point of view, a reverse repot is simply the same buyout contract, not the seller`s. Therefore, the seller executing the transaction would call it a “repo,” whereas in the same transaction, the buyer would refer to it as a “reverse repo.” “Repo” and “Reverse repo” are therefore exactly the same type of transaction that is described only from opposite angles. The term “reverse-repo and sale” is commonly used to describe the creation of a short position on a debt security in which the buyer immediately sells on the open market the guarantee provided by the seller as part of the repurchase transaction.

At the time of the count, the buyer acquires the corresponding guarantee on the open market and the pound to the seller. In the case of such a short transaction, the buyer expects the corresponding warranty to decrease between the rest date and the billing date. In addition, since the crisis, the Ministry of Finance has kept funds on the Treasury General Account (TGA) from the Federal Reserve and not from private banks.