Beginning in late 2008, the Fed and other regulators put in place new rules to address these and other concerns. The impact of these rules has been increased pressure on banks to maintain their safest assets, such as Treasuries. According to Bloomberg, the impact of the regulation has been significant: at the end of 2008, the estimated value of global securities borrowed in this way was nearly $4 trillion. But since then, that figure has approached $2 trillion. In addition, the Fed has increasingly entered into retreat operations (or reverse retirement operations) to compensate for temporary fluctuations in bank reserves. In the case of a loan, for example, both values must take into account the own price and the value of the interest accrued on the loan. Once the actual interest rate is calculated, a comparison of the interest rate with that of other types of financing will determine whether retirement is a good deal or not. As a general rule, repo operations offer better terms than money market cash credit agreements as a secured form of loan. From the perspective of a reverse-repo participant, the agreement can also generate additional revenue from excess cash reserves. 2) Liquidity to be paid when buying back the security When the central banks of the State buy securities from private banks, they do so at a reduced rate called the repo rate. Like policy rates, repo rates are set by central banks.
The repo interest rate system allows governments to control the money supply within economies by increasing or reducing available resources. A cut in repo rates encourages banks to sell securities for cash to the government. This increases the money supply available to the general economy. Conversely, by raising repo rates, central banks can effectively reduce the money supply by preventing banks from reselling these securities. The Fed continues to worry about a failure of a large repo distributor, which could stimulate a sale of fire under money market funds, which could then have a negative impact on the wider market. The future of the repo space may include continuous rules to limit the actions of these transactors, or even involve a transfer to a central clearing house system. However, for the time being, retirement operations remain an important means of facilitating short-term borrowing. The main difference between a maturity and an open repo is the time between the sale and redemption of the securities. “If (banks) withdraw completely from the transitional mortgage business, they need to find other assets to replace it,” one fund manager said. .