DEFINITION of 'Purchase and Resale Agreements - PRAs'

An arrangement between the Bank of Canada and dealers whereby the Bank buys treasuries from a dealer, and the dealer agrees to repurchase the treasuries the next day.

BREAKING DOWN 'Purchase and Resale Agreements - PRAs'

In a PRA, the Bank of Canada is essentially lending money to the dealer at the midpoint of the overnight operating band rate in order to increase the dealer's liquidity.

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RELATED FAQS
  1. What is the primary use of reverse repurchase agreements?

    Discover how the Federal Reserve utilizes reverse purchase agreements for the primary purpose of offsetting temporary shifts ... Read Answer >>
  2. What is the difference between a repurchase agreement and reverse repurchase agreement?

    Learn how a repurchase agreement is a form of collateralized lending and a reverse repurchase agreement is a form of collateralized ... Read Answer >>
  3. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    Read about the lender risks of participating in reverse repurchase agreements or for dealers who use the Fed's overnight ... Read Answer >>
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