Special Purchase and Resale Agreement - SPRA

DEFINITION of 'Special Purchase and Resale Agreement - SPRA'

An open market operation in which the Bank of Canada purchases securities that are repurchased by the seller the following day. This is designed to lower overnight interest rates and increase the money supply.

BREAKING DOWN 'Special Purchase and Resale Agreement - SPRA'

In a SPRA, the Bank of Canada buys securities from a chartered bank and agrees to sell them back to the bank the next day. Because selling these securities requires the Bank of Canada to spend some cash, the money supply is increased and this helps decrease overnight interest rates.

This is essentially an expansionary move by the Bank of Canada on the monetary system.

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