Matched sale transaction

Definition:

Applies mainly to convertible securities. Procedure whereby the Federal Reserve Bank of New York sells government securities to a nonbank dealer against payment in federal funds. The agreement requires the dealer to sell the securities back by a specified date, which ranges from 1 to 15 days. The Fed pays the dealer a rate of interest equal to the discount rate. These transactions, also called reverse repurchase agreements, decrease the money supply for temporary periods by reducing dealers' bank balances and thus excess reserves.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Managed float

Also known as "dirty" float, this is a system of floating exchange rates with central bank intervention to reduce currency fluctuations.

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