A reverse repurchase agreement conducted by the Desk, also called a “reverse repo” or “RRP,” is a transaction in which the Desk sells a security to an eligible counterparty with an agreement to repurchase that same security at a specified price at a specific time in the future.

For the party selling the security (and agreeing to repurchase it in the future), it is a repurchase agreement (RP) or repo; for the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement (RRP) or reverse repo.

Repurchase agreements, or repos, are a form of short-term borrowing used in the money markets, involving the purchase of securities with the agreement to sell them back at a specific date, usually for a higher price.

For the buyer of the securities, it is a way to lend money and get paid with interest in the future.

Repo vs. Reverse Repo

Repros and reverse repros represent the same transaction, but are titled differently depending on which side of the transaction you’re on.

  • For the party originally selling the security (and agreeing to repurchase it in the future) it is a repurchase agreement (RP) or repo.
  • For the party originally buying the security (and agreeing to sell in the future) it is a reverse repurchase agreement (RRP) or reverse repo.