Pension transactions are generally considered safe investments, as the security in question serves as collateral, which is why most agreements involve U.S. Treasury bonds. Considered an instrument of the money market, a pension purchase contract is indeed a short-term loan, guaranteed by security and an interest rate. The buyer acts as a short-term lender, the seller as a short-term borrower. The securities sold are the guarantees. This will help achieve the objectives of both parties, namely the guarantee of financing and liquidity. In addition, there are short-term unsecured financings for financial stability, such as commercial securities.B. These types of funds must be paid out within weeks or months when they expire. An organization under critical conditions may find it difficult to obtain financial loans elsewhere. There are three main types of retirement operations. Some federal government agencies make short- and long-term commitments, including credit agencies Fannie Mae and Sallie Mae. These commitments are generally not supported by the government, so they offer a slightly higher return than the T-Bills, but the risk of default remains very low. Agency documents are actively negotiated, but are not as marketable as the T-Bills.
Companies are important buyers of this type of money market instrument. There are mechanisms built into the possibility of buyback agreements to reduce this risk. For example, many depots are over-secure. In many cases, a margin call may take effect to ask the borrower to change the securities offered when the security loses value. In situations where the value of the guarantee is likely to increase and the creditor cannot resell it to the borrower, subsecured protection can be used to reduce risk. The trade document refers to unsecured short-term notes issued by financial and non-financial companies. Commercial paper has durations of up to 270 days (maximum allowed without SEC registration requirement). The dollar volume of commercial securities exceeds the amount of all money market instruments, with the exception of T-Bills. It is generally issued by large creditworthy companies with unused bank lines of credit and therefore carries a low risk of default.
Assuming a consideration 1A 397 million is the pier of DBR 4 (Germany Federal Republic of Germany, or German government bond with a coupon of 4%) August 4, 2034 to Counterpart 2A, which is scheduled for September 30, 2018 for a billing price of $513 million. At the same time, counterparty A1, five months later, agrees to repurchase a repayment of US$397 million, five months later, for transactions of February 28, 2019, at a purchase rate equal to the price of the invoice plus interest of 0.45 % From the buyer`s point of view, the reverse refund is simply the same repurchase contract. , not from the buyer`s point of view. 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.
