Repo

RECENT NEWS
Reuters  May 24  Comment 
* Synopsys will receive an initial share delivery of approximately 2.0 million shares
Clusterstock  May 10  Comment 
NEW YORK (Reuters) - The Federal Reserve on Tuesday awarded $31.04 billion of one-day, fixed-rate reverse repurchase agreements to 24 bidders at an interest rate of 0.25 percent, the New York Fed said on its website. On Monday, the Fed allotted...
Clusterstock  May 9  Comment 
NEW YORK (Reuters) - The Federal Reserve on Monday awarded $23.24 billion of one-day, fixed-rate reverse repurchase agreements to 17 bidders at an interest rate of 0.25 percent, the New York Fed said on its website. On Friday, the Fed allotted...
Mondo Visione  May 5  Comment 
In April 2016, trading volumes of repo with the CCP reached RUB 13.3 trln, a record since its launch in February 2013. The proportion of repo turnover cleared across the CCP accounted for 62% of the total repo market. The average daily trading...
Reuters  May 4  Comment 
* Melco Crown Entertainment announces privately negotiated share repurchase
The Hindu Business Line  Apr 28  Comment 
4 of 5 external members recommended a reduction in the policy repo rate
Financial Times  Apr 27  Comment 
Swiss interdealer broker sets sights on European repo market
Financial Times  Apr 26  Comment 
US bank plans to move into repo trading by taking over start-up trading venue from Tradition
newratings.com  Apr 20  Comment 
ANKARA (dpa-AFX) - The Turkish Lira drifted higher against the U.S. dollar in European trading on Wednesday, as the Central Bank of the Republic of Turkey held its benchmark repo rate unchanged, as expected. In a statement, the bank said it is...
newratings.com  Apr 15  Comment 
STOCKHOLM (dpa-AFX) - Sweden's central bank retained its key interest rate at negative zone and expanded its asset purchase plan on Thursday. The Executive Board of the Riksbank maintained the repo rate at -0.50 percent. The bank said that...




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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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