Sale and Repurchase Agreement - SRA

DEFINITION of 'Sale and Repurchase Agreement - SRA'

An open market operation, implemented by the central Bank of Canada, that is designed to affect overnight interest rates and modify the supply of money.

BREAKING DOWN 'Sale and Repurchase Agreement - SRA'

An SRA is implemented when the Bank of Canada sells securities to a chartered bank and agrees to repurchase them the following day.

This is a contradictory move by the Bank of Canada on the monetary system, since selling these securities requires the chartered banks to spend some cash, thereby reducing the money supply and increasing interest rates.

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