Repo

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The Hindu Business Line  Nov 25  Comment 
As core lending biz remains sluggish, lenders make use of excess funds to boost income
newratings.com  Nov 24  Comment 
ANKARA (dpa-AFX) - Turkey's central bank unexpectedly hiked the key lending rate and the one-week repo rate on Thursday, while leaving the borrowing rate unchanged, citing the deterioration in economic activity and risks to the inflation...
SeekingAlpha  Nov 23  Comment 
The Hindu Business Line  Nov 17  Comment 
HSBC expects the RBI to cut repo rates by another 25 basis points (bps) before the end of this fiscal. Whether it would be at the December meeting or in February would depend on market volatility ar...
The Hindu Business Line  Nov 16  Comment 
HSBC economist Pranjul Bhandari expects another cut of 25 bps in repo rates from RBI before the end of this fiscal. The exact timing - whether it would be at the December meeting or in February would...
Mondo Visione  Nov 11  Comment 
The OFR released a working paper today entitled, "Do Higher Capital Standards Always Reduce Bank Risk? The Impact of the Basel Leverage Ratio on the U.S. Triparty Repo Market.” This paper examines how risk-taking in the repurchase agreement,...
Reuters  Nov 10  Comment 
The Reserve Bank of India (RBI) said on Thursday it would allow market participants to "re-repo", or to lend out, securities received under its reverse repo operations starting Nov. 26, the latest in a push to deepen fixed income markets.
The Hindu Business Line  Nov 7  Comment 
Higher sugar prices and other income have contributed to a strong performance for E.I.D.-Parry during the second quarter of the current year.On a standalone basis, the Murugappa Group company has repo...
newratings.com  Nov 3  Comment 
PRAG (dpa-AFX) - The Czech central bank held its key interest rate steady on Thursday, and reaffirmed its currency ceiling, as expected. The Czech National Bank Board left the benchmark two-week repo rate unchanged at 0.05 percent. The discount...
Financial Times  Nov 2  Comment 
As lending standards eased, borrowers have taken on debt they may fail to repay




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Repurchase agreements, or repos, are transactions in which a borrower "sells" securities to a lender and agrees to purchase it back for at a specified price on a later date. Most repos are overnight transactions between financial institutions and are primarily used in money markets.

In effect, a repo is a secured loan since the lender gets a collateral for the cash being lent out -- the only difference is that the ownership of the collateral is transferred in the case of repos, whereas under a loan the borrower retains ownership of the collateral. The difference between the selling price and the repurchase price is the effective interest in these transaction.

Rates on repo are different from LIBOR rates, since repos are considered a secured loan whereas the LIBOR is used for unsecured interbank lending.

The US repo market is estimated to be around $4.5 trillion in 2008.[1]

Uses of Repo

Securities dealers are primary users of overnight repos. In order to meet liquidity requirements, they enter into these agreements with short-term investors such as money market funds or other investors who need certain securities for a short-term. Repos are used to finance long positions, borrow money to fund speculative investments, and cover short positions in securities. The Federal Reserve also uses repos for open-market operations where they add or decrease reserves to the banking system by trading in US Treasury securities.

Although repo transactions are backed by a collateral, i.e. the lender can sell the securities to redeem the cash, counter-party risks exists. Specifically, the other party may go bankrupt and not repurchase the securities.

References

  1. WSJ Online, retrieved October 31, 2008

http://www.bestcashloans.org.uk/

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