What Is a Reverse Repo?
The so-called reverse repurchase of government bonds is essentially a short-term loan. In other words, individuals borrow their funds through the Treasury bond repurchase market to obtain a fixed interest income; and the repurchasing party, that is, the borrower uses his own national debt as collateral to obtain this loan, and repays the principal and interest after maturity . In popular terms, it is to dismantle funds through the government bond repurchase market. In fact, it is a short-term loan, that is, you lend money to others to obtain fixed interest; others use government bonds as collateral and pay principal and interest when due. The security of reverse repo is super strong, which is equivalent to national debt.
Treasury reverse repo
- 1. Good security and low risk, similar to short-term loans,
- (I) Profitability of the transaction
- Bank demand deposits have very low interest rates, and since the 21st century the CPI has been much higher than demand rates. And the national debt is inverse
- Investors who want to repurchase can only make new investments in the Shanghai Stock Exchange 204 *** and Shenzhen 1318 **
- (1) Repurchase commission: The client commissions a securities company to conduct a repurchase transaction. Customers can also place orders directly through the counter, telephone self-service, online trading, etc. like stock trading;
- (2) Declaration of repurchase transactionsAccording to the client's entrustment, the securities company makes a transaction declaration to the host of the stock exchange and issues a repo transaction instruction. The repo transaction instruction must declare the securities account, otherwise the repo declaration is invalid.
- (3) Transaction MatchingThe exchange host matches and matches valid financing transaction declarations and margin trading transactions.
- (4) Delivery of transaction data-After the market is closed on T day, the exchange will send the transaction data of the repurchase transaction together with the transaction data of other securities transactions to the settlement company.
- (5) Settlement and settlement-the settlement company uses settlement reserve account as a unit to combine the receivable transaction receivables and payable funds data with other securities transaction data on the same day, and calculate the balance of the securities company's brokerage and self-operated settlement reserve The balance of net receivables or net payables in the payment account, and the settlement of funds on T + 1 day.
- (6) Repayment-For example, it is a 7-day reverse repurchase. On T + 7, customer funds are available, and on T + 8, funds can be transferred, and the repayment is automatic, and no transaction is required.
- Commission charged :
- Treasury bond repurchase commission levels of 100,000 yuan per day for one, two, three or four days; seven days
- Commissions for repurchases on SSE :
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- Note: The commission standards for the Shenzhen Stock Exchange's repurchase products are the same as those for the Shanghai Stock Exchange, but it should be noted that the commission is charged at a level not exceeding the above commission level. For example, the reverse repurchase of one-year Treasury bonds in Shenzhen does not exceed 0.01 of the transaction amount , and so on.
- Annual rate of return = turnover × transaction price × repurchase days / turnover × 365
- Cost = turnover x commission rate.
- There is no minimum 5 yuan limit. Only charged at the prescribed commission rate. For example, a reverse repurchase of 100,000 yuan will be charged in one day, 100,000 yuan will be collected in two days, and 2 yuan will be received in 7 days.
- Due to the impact of the Spring Festival and the dual factors at the end of the month, the so-called "short-term wealth management product", the soaring reverse repurchase rate of government bonds, has caused concern. On October 15, 2014, the Shanghai Stock Exchange reversed the repurchase of 3-day, 4-day, and 7-day varieties, and the annualized interest rates closed at 9.025%, 17.5%, and 9.495%, respectively. 8.355%, 14.3% and 5.1%. According to the new share issuance arrangement, no new shares were purchased this week. This also means that a large amount of new funds will be idle before the Spring Festival, and it is expected to realize short-term financial management with the help of the reverse repurchase of government bonds. [1]
- I. Applicable object: Individual investors with funds greater than 100,000 / 0.1 million, who do not meet the bank's current interest rates, who are not willing to "live money" become "dead", and who are afraid of risks; companies with abundant liquidity.
- Experts point out that the market has digested new bearish sentiments, and investors' long sentiment is high
- The issuance of 11 new shares was staged again. The 8 new shares that were launched yesterday made the capital market a big hit again.
- As of the close of October 27, 2014, the Shanghai Securities New Pledged Treasury Reverse Repurchase overnight product GC001 rose by 185.59% to 3.17% annualized interest rate, and the Shenzhen Securities Pledged Treasury Reverse Repurchase overnight product R-001 rose 91% to 1.91% annualized interest rate. The gains of the two once surged to 1882.43% and 1590% during the session. In addition, the two-day reverse bond products GC002 and R-002 on the Shanghai and Shenzhen Exchanges also rose 104.41% and 163.16%, respectively, and other medium and long-term varieties rose to varying degrees.
- In fact, institutions have been brewing new products for a long time, and the capital market has "emphasized every new market" has been reflected earlier this week. At the beginning of Monday's opening, the two-day and three-day varieties of the Treasury bonds on the Shanghai and Shenzhen Stock Exchanges were rising in a straight line. Among them, the three-day product of the Shanghai Stock Exchange reverse-purchase three-day product GC003 has accumulated a cumulative increase of 369.24% since the week. The cumulative increase of the T-bond reverse repurchase three-day product R-003 reached 775%.
- "The IPO subscription and payment allowances have limited disruptions to the funds. Benefiting from the liquidity release of the previous 500 billion yuan SLF expansion to the five major banks and the downward repo rate in the open market, the current inter-bank market liquidity is generally plentiful and monetary policy is also The overall stability and looseness. "Chen Yifei, a senior researcher at the Asset Management Center of the Bank of Communications, told a reporter of the Securities Daily that it is expected that the central bank may comprehensively carry out multiple methods and methods such as the state treasury fixed deposit tendering and positive repurchase shrinkage to maintain interbank liquidity Overall stable.
- In addition to the interbank market, except Shibor rose 3.1 basis points a week, the interest rates of the other varieties have fallen. Among them, Shibor fell 2.5 basis points to 2.691% overnight. The new market has not yet affected the interbank funds market.
- Since the completion of the main index futures contract IF1409 on Friday, IF1410 has become the new main index futures contract. Since the opening of the main contract IF1410 this Monday, it has been all the way down, diving 50.4 points, a decline of 2.07%. However, since Tuesday, the main contract IF1410 has been rising all the way, as of the 27th closing to close at 2468.4 points.
- On October 28, 2014, Baose, Jintuo and Dongfang Cable will start online and offline purchases. Since then, the fourth batch of new share purchases will come to an end. [2]