Repo transactions grow in Azerbaijan

Repo transactions grow in Azerbaijan
# 30 December 2008 12:42 (UTC +04:00)
Baku. Vahab Rzayev – APA-Economics. The amount of repo transactions has significantly increased in Azerbaijan.
Repo transactions between the central bank and commercial banks reached AZN 755.27 million as at December 1, twice the same period last year. All of the repos were one-day transactions as three-day and long-term repos are not used in Azerbaijan.
In repurchase agreements, or repos, central banks typically sell and buy debt securities for a set period, regulating the amount of money available in the banking system.
In this deal, the party that sells securities to another party in return for cash agrees to repurchase equivalent securities at an agreed price and on an agreed future date.
It thus represents an important tool in monetary management in order to regulate liquidity.
To sum up, the central bank resorts to reverse repos when liquidity declines and to repos when liquidity is up.
However, the real picture shows that liquidity has declined in banks and banks rush for short-term notes issued by the central bank.
It is clear that notes are more profitable than repos and the decline in repo turnover shows lack of available funds in banks.