Federal Reserve Repurchase Agreements

Repurchase Agreements

When the [FED] arranges a repurchase agreement, it purchases securities from a primary dealer (or the dealer's customer) and agrees to resell the securities to the dealer (or customer) on a specified date. The [FED] arranges two types of repurchase agreements: System and customer-related. For both types, the [FED] solocits offers from primary dealers. The dealers may make offers on their own behalf or on the behalf of their cu stomers. The offers set forth a rate and an amount of repurchse agreements that the dealer (or its customer) is prepared to transact. The [FED] ranks the bids in descending order of rate. It accepts the offer with the highest rate first and continues to accept lower rates until the total volume of offers equals the amount of reserve balances that the Desk wants to inject into the depository system. - Federal Reserve Bulletin, Novemeber 1997, page 867.