Repo

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Mondo Visione  Jan 5  Comment 
Each month NEX publishes average daily volume data in selected products. The volume figures cover electronically traded products - spot foreign exchange, US Treasury products, European and US repo products. Average daily volume (in USD...
The Hindu Business Line  Dec 25  Comment 
Banks are yet to transmit the 175-basis point reduction since January 2015. They should effect this before asking for more cuts
Mondo Visione  Dec 22  Comment 
In December 2016, as part of the development of the Moscow Exchange Group’s services, National Settlement Depository (NSD) and Bloomberg began testing a new collateral management service for OTC repos.   The new service will allow the...
The Economic Times  Dec 21  Comment 
Releasing today the Minutes of the Monetary Policy Committee Meeting (MPC) held on December 6-7, Reserve Bank of India said all the six members of the panel were in favour of retaining the repo rate at 6.25 per cent.
newratings.com  Dec 21  Comment 
STOCKHOLM (dpa-AFX) - Sweden's central bank retained its negative interest rate and extended the quantitative easing programme on Wednesday. The Executive Board of the Riksbank maintained the repo rate at -0.50 percent as economists had...
Mondo Visione  Dec 13  Comment 
To propel the long-term sound growth of the exchange-traded bond market and further improve the risk management on collateralized repo of bonds on the exchange-traded market, China Securities Depository and Clearing Co., Ltd. (CSDC), the...
The Economic Times  Dec 10  Comment 
Overseas investors look at the RBI's policy decision positively as they continue to earn a good mark-up over returns in their home markets for funds.
Mondo Visione  Dec 8  Comment 
SIFMA Managing Director Rob Toomey testified this morning on behalf of SIFMA before the House Committee on Financial Services Subcommittee on Capital Markets in a hearing entitled “The Impact of Regulations on Short-Term...
The Economic Times  Dec 8  Comment 
All six members of the Monetary Policy Committee (MPC) of RBI voted in favour of keeping the repo rate unchanged at 6.25 per cent.
The Economic Times  Dec 8  Comment 
Indian bond yields jumped sharply on Wednesday after the central bank unexpectedly kept the key policy repo rate unchanged, prompting a sudden cutting of long positions across the board.




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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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