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 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. Forex

    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 specifically, monetary policy focuses on how a country determines the ...
  3. Forex

    How do central banks acquire currency reserves and how much are they required to hold?

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign exchange reserves. Reserve currencies usually also become the international ...
  4. Economics

    In what instances is quantitative easing used?

    Discover when, how and why the Federal Reserve and other central banks turn to quantitative easing to stimulate economic activity.
  5. Economics

    How does the Federal Reserve determine the discount rate?

    Learn about the several different kind of discount rates offered to banks and other depository institutions through the Federal Reserve's discount window.
  6. Economics

    What is the difference between fiscal policy and monetary policy?

    Utilizing founding principles of macroeconomics through both fiscal and monetary policy can have drastic effects on a country's economic state.
  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. Bonds & Fixed Income

    How are treasury bill interest rates determined?

    Find out why interest rates for U.S. Treasury bills are determined at auction and how so-called "competitive" bidders impact returns on these debt securities.
  9. Bonds & Fixed Income

    How do treasury bill prices affect other investments?

    Find out how the price and yield of Treasury bills can impact the level of risk investors are willing to accept in their securities.
  10. Bonds & Fixed Income

    How does quantitative easing in the U.S. affect the bond market?

    See why it is very difficult to evaluate the impact of the Federal Reserve's quantitative easing, or QE, program on bond prices and yields.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center