Beginning in late 2008, the Fed and other regulators adopted new rules to address these and other concerns. One consequence of these rules was to increase pressure on banks to maintain their safest assets, such as Treasuries. They are encouraged not to borrow them through boarding agreements. According to Bloomberg, the impact of the regulation was significant: at the end of 2008, the estimated value of the world securities borrowed was nearly $4 trillion. But since then, that number has been close to $2 trillion. In addition, the Fed has increasingly entered into pension (or self-repurchase) agreements to compensate for temporary fluctuations in bank reserves. A pension transaction is when buyers buy securities from the seller for cash payment and agree to cancel the transaction on a given date. It works as a short-term secured loan. A pension contract (PR) is a short-term credit by which both parties agree to the sale and future repurchase of assets within a certain contract term. The seller sells a treasury order or other state security with the promise to repurchase them at a given time and at a price that includes an interest payment. If interest rates are positive, the pf redemption price should be higher than the original PN selling price. Buyback contracts can be concluded between a large number of parties. The Federal Reserve enters into pension contracts to regulate money supply and bank reserves.
Individuals generally use these agreements to finance the purchase of bonds or other investments. Pension transactions are short-term assets with maturity terms called “rate,” “term” or “tenor.” The value of the security is generally higher than the purchase price of the securities. The buyer agrees not to sell the security unless the seller comes from his late part of the agreement. On the agreed date, the seller must repurchase the securities, including the agreed interest rate or pension rate. For the party that sells security and agrees to buy it back in the future, it is a repo; for the party at the other end of the transaction, the purchase of the warranty and the consent to sell in the future, it is a reverse buyback contract.
