Repo

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The Hindu Business Line  Jun 12  Comment 
Despite the clamour for a rate cut, the RBI kept its key policy rate (repo) unchanged in the latest June policy. But it lowered the SLR (statutory liquidity ratio) by 50 basis points to 20 per cent. W...
The Economic Times  Jun 7  Comment 
Headed by RBI Governor Urjit Patel, the Monetary Policy Committee (MPC) for the fourth straight time kept the repo rate unchanged at 6.25 per cent.
The Economic Times  Jun 7  Comment 
The S&P BSE Sensex rose 81 points to end the session at 31,271, with Reliance Industries, ICICI Bank and Maruti being the major contributors to the surge.
The Hindu Business Line  Jun 7  Comment 
The following are the highlights of the second bi-monthly monetary policy for 2017-18 as announced by the RBI: * Repo rate unchanged at 6.25%, * Reverse repo unchanged at 6% * Statutory Liqu...
The Economic Times  Jun 7  Comment 
RBI held repo rate at a six-year low of 6.25 per cent on April 6, 2017 and reverse repo rate by 0.25 per cent to 6 per cent.
The Hindu Business Line  Jun 7  Comment 
Healthcare, metal stocks shine
Mondo Visione  Jun 1  Comment 
New service streamlines dealer and client trade flows via RFQ trading protocol Full client audit trail for proof of best execution Integrated with current trading software for STP connectivity LCH Ltd signs as first buy-side trading...
Mondo Visione  May 23  Comment 
As the bond market of Shenzhen Stock Exchange (SZSE) has been scaling up in recent years, the trading amount of pledge-styled repo (hereinafter referred to as “repo”) also increases and the market is paying more and more attention to the...
The Hindu Business Line  May 17  Comment 
The Karnataka Cabinet on Wednesday cleared the Memorandum of Association (MOA) between Karnataka State Industrial and Infrastructure Development Corporation (KSIIDC) and GAIL Gas Limited.Briefing repo...
Mondo Visione  May 3  Comment 
The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced that the Securities and Exchange Commission (SEC) has approved rule changes allowing its...




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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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