Liquidity Management
Repos have the advantage that they give cash-rich institutions, such as central banks, relatively precise control over liquidity. The fact that injections of liquidity are reversed when repos mature means central banks can absorb liquidity simply by not renewing repos that are falling due. Obviously, to use this technique to control liquidity, the maturity term structure has to be tailored to ensure that sufficient stocks of repos mature on appropriate days. Central banks can also withdraw liquidity directly using reverse repos. See Central Banks pages for more information.
