Bond for Bond Lending

AAA

DEFINITION of 'Bond for Bond Lending'

A lending structure used in the Federal Reserve's security lending facility, whereby borrowers receive a loan of bonds, by using all or a portion of their own portfolio of bonds for collateral. The bond for bond lending structure is different from the traditional cash for bond lending structure, in which the borrower takes the funds as cash instead.

INVESTOPEDIA EXPLAINS 'Bond for Bond Lending'

The bond for bond lending structure is sometimes preferable because it can allow for better cash management for the lender. The Federal Reserve sometimes uses this structure to help minimize the impact on the aggregate level of cash available in the banking system.

RELATED TERMS
  1. M2

    A measure of money supply that includes cash and checking deposits ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Facility

    A formal financial assistance program offered by a lending institution ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  6. Money Supply

    The entire stock of currency and other liquid instruments in ...
Related Articles
  1. How The U.S. Government Formulates Monetary ...
    Personal Finance

    How The U.S. Government Formulates Monetary ...

  2. How do open market operations affect ...
    Forex

    How do open market operations affect ...

  3. What Is the Quantity Theory of Money?
    Fundamental Analysis

    What Is the Quantity Theory of Money?

  4. How do central banks acquire currency ...
    Forex

    How do central banks acquire currency ...

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center