Matched Sale-Purchase Agreement - MSPA


DEFINITION of 'Matched Sale-Purchase Agreement - MSPA'

An arrangement whereby the Federal Reserve sells government securities (U.S. Treasuries) to an institutional dealer or the central bank of another country with the contractual agreement to purchase the security back within a short period of time, usually less than two weeks. The security is bought back at the same price at which it was sold, and decreases banking reserves during the term of the matched sale-purchase agreement.

This is also known as a "system MSP".

BREAKING DOWN 'Matched Sale-Purchase Agreement - MSPA'

This is a rarely-used method of temporarily decreasing reserves and securities holdings, and is done to slightly prohibit market liquidity for the term of the MSP. This financial arrangement is different than the standard open-market operations (such as selling Treasuries to investors) where actions done by the Federal Reserve make permanent changes to banking reserves and securities levels.

  1. Forward Contract

    A customized contract between two parties to buy or sell an asset ...
  2. Central Bank

    The entity responsible for overseeing the monetary system for ...
  3. Open Market Operations - OMO

    The buying and selling of government securities in the open market ...
  4. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  5. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
  6. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
Related Articles
  1. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  2. Economics

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  3. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  4. Economics

    Open Market Operations vs. Quantitative Easing

    How does the Fed's implementation of Quantitative Easing differ from its more conventional open market operations?
  5. Professionals

    Will Interest Rates Rise at the Next Fed Meeting?

    Everyone wants to know what the Federal Reserve will do next, but the Fed doesn't even know what it's next move will be.
  6. Economics

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  7. Stock Analysis

    Why Is GE Selling Some of Its Subsidiaries?

    Learn why GE is selling off a substantial amount so it does not have to comply with increased government regulation in the wake of the 2008 financial crisis.
  8. Investing News

    Why Did Markets Rally on News of a December Rate Hike?

    Yesterday, Fed chairwoman Janet Yellen, in a speech to the University of Massachusetts at Amherst, indicated that the central bank is on track to still raise rates before the year is out.
  9. Economics

    How US Interest Rates Move the World Economy

    Because the US has the world's largest economy, fluctuations in America's interest rates affect much more than domestic growth
  10. Forex Strategies

    Will a Rate Hike Appreciate The Dollar Even More?

    Many market participants expect the US Dollar to rise after the start of the next rate hike cycle.
  1. How do open market operations affect the U.S. money supply?

    Formulating a country's monetary policy is extremely important when it comes to promoting sustainable economic growth. More ... Read Full Answer >>
  2. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Full Answer >>
  3. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  4. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  5. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  6. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!