Matched Sale-Purchase Agreement - MSPA

AAA

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".

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Wall Street Journal Prime Rate

    An interest rate that large banks in the United States charge ...
RELATED FAQS
  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 >>
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 Impact On Equities If The Rates Hike?

    The Fed is on course for raising interest rates. True, that leaves the question of when (most likely June or September, but could be later) and how much.
  3. Investing

    Are You Ready To Invest In The Tech Sector?

    Tech stocks, particularly those of mature tech companies, are well positioned and offer meaningful upside potential in the near-term.
  4. Investing

    The Impact Of A Stronger Dollar In The Markets

    The economy continues to improve, but also demonstrated that some areas of the stock market are more vulnerable to an increase in interest rates.
  5. Bonds & Fixed Income

    Does Quantitative Easing Work?

    The US, Japan, and now the EU have embraced quantitative easing. But what works for the economy of one country doesn't necessarily work for another's.
  6. Trading Strategies

    Consider The Season On Trading Day

    Calendar and clock bias, better known as seasonality, is a frequently misunderstood concept that exerts a huge influence on the ticker tape.
  7. Investing

    Reassessing Your Approach To Bond Investing

    Rethinking your fixed-income portfolio may not resonate in quite the same way as dropping 10 pounds or finally giving up that smoking habit.
  8. Economics

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  9. Economics

    Evaluate Your Investment Portfolio For 2015

    The beginning of a year is a good time to evaluate your investment portfolio and think about how to position it going forward.
  10. Economics

    How Is Europe Affecting The Martkets?

    Quantitative easing in Europe is coming, but too slowly to avert a severe slowdown and perhaps even a hard landing.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center