The main users of such an agreement are usually monetary authorities, financial institutions, investment fund companies, sovereign wealth funds, commercial banks, pension funds, insurance companies, etc. Reverse rest is mainly used by monetary authorities to obtain money from the banking system and to reduce or prohibit the increase in liquidity in the market in order to control the money supply in the economy. As a general rule, deposits are only provided on highly liquis securities that can be easily sold if the seller of the securities does not repurchase them on the due date. Most repurchase transactions are carried out on high-yield fixed-rate securities such as AAA-rated government bonds. Deposits can therefore be used to finance the purchase of bonds, such as the use of a margin credit to finance the acquisition of shares. Reverse deposits can be used to sell bonds (such as a stock loan) if the view is that the price of the loan is likely to fall. In this case, the purchaser of the securities, at the beginning of the retro-consumption, sells them on the bond market instead of holding them and buys them back shortly before the expiration of the re-pension. Deposits have many advantages; For security buyers, they can place cash for a period of time – compared to the night, 30, 60 and 90 day options that can be offered by banks or financial instruments. Second, pension loans are covered by very high quality liquid securities, which makes them relatively safe. The repurchase agreement (repo or PR) and the repurchase agreement (RRP) are two key instruments used by many large financial institutions, banks and some companies.
These short-term agreements provide temporary lending opportunities that contribute to the financing of day-to-day operations. The Federal Reserve also uses pension and auto-repo agreements as a method of controlling the money supply. Since the advent of COVID-19, the Fed has significantly increased the volume of its repo operations in order to bring money to money markets. The Fed facility provides primary traders with liquidity in exchange for cash and other government-guaranteed securities. Before the coronavirus turmoil was put on the market, the Fed offered $100 billion in overnight pension and $20 billion in two-week repo. On March 9, the company was launched with a deposit of $175 billion over two weeks and $45 billion in two weeks of repo. On March 12, the Fed announced a huge expansion. It is now on a weekly basis offering much longer terms: $500 billion for a pension month and $500 billion for three months. On March 17, at least for a period, it also greatly increased the night pension offered.