Term Repurchase Agreement

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DEFINITION of 'Term Repurchase Agreement'

Under a term repurchase agreement, a bank will agree to buy securities from a dealer and then resell them a short time later at a preset price. The difference between the purchase and sale prices represents the interest paid for the agreement. Term repurchase agreements are used as a short-term cash-investment alternative.

BREAKING DOWN 'Term Repurchase Agreement'

Banks and other savings institutions that are holding excess cash quite often employ these instruments, because they have shorter maturities than certificates of deposit. Term repurchase agreements also tend to pay higher interest than overnight repurchase agreements because they carry greater interest-rate risk, since their maturity is greater than one day.
 

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RELATED FAQS
  1. What is the difference between a term and open repurchase agreement?

    The major difference between a term and an open repurchase agreement (repo) is in the term or tenor. In a term repo, the ... Read Full Answer >>
  2. What are some examples of money market funds?

    Money market mutual funds are designed to offer savers low-risk, liquid and short-term investments. They are normally offered ... Read Full Answer >>
  3. For what types of accounts are demand deposits available?

    There are essentially three types of accounts available as demand deposits: checking accounts, savings accounts and money ... Read Full Answer >>
  4. Under what circumstances would someone enter into a repurchase agreement?

    In finance, a repurchase agreement represents a contract between two parties, where one party sells a security to the other ... Read Full Answer >>
  5. How does the velocity of M2 money supply change?

    According to economic theory, the velocity of money is the number of times a unit of currency changes hands over a set period ... Read Full Answer >>
  6. How can I look up average banker's acceptance yields?

    Average banker's acceptance yields are published regularly in the Wall Street Journal and updated continuously on WSJ.com. ... Read Full Answer >>

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