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===What is a [[repo]]?=== | ===What is a [[repo]]?=== | ||
'''In a {{nutshell}}: A [[repo]], or [[repurchase agreement]], and its close relation the [[sell/buy-back]]<ref>Or [[buy/sell-back]] - in any case known in the {{gmra}} as a {{gmraprov|Buy/Sell Back Transaction}}.</ref>, is a way of [[borrow]]ing [[government bond]]s. | '''In a {{nutshell}}''': A [[repo]], or [[repurchase agreement]], and its close relation the [[sell/buy-back]]<ref>Or [[buy/sell-back]] - in any case known in the {{gmra}} as a {{gmraprov|Buy/Sell Back Transaction}}.</ref>, is a way of [[borrow]]ing [[government bond]]s. | ||
''Structure''': Repos are structured as a spot [[DVP]] sale at market, and a later [[DVP]] repurchase, also at market, of the same securities (hence, “repurchase”). In any case there is always a cash leg — by which the “Buyer” pays for the | '''Documentation''': Repos are most commonly documented under a [[2000 Global Master Repurchase Agreement]], the industry standard English law agreement, published by [[The Bond Market Association|TBMA]] and [[International Capital Markets Association|ICMA]] | ||
'''Structure''': Repos are structured as a spot [[DVP]] sale at market, and a later [[DVP]] repurchase, also at market, of the same securities (hence, “repurchase”). In any case there is always a cash leg — by which the “Buyer” pays for the [[govvie]]s — and a securities leg — by which the {{gmraprov|Seller}} delivers them. Contrast that with a stock loan where both the {{gmslaprov|Loan}} and the {{gmslaprov|Collateral}} leg are physical settlements of securities. | |||
'''Term''': Repo trades are usually very short term, typically overnight. | '''Term''': Repo trades are usually very short term, typically overnight. | ||
'''[[Reverse repo]]''': a [[reverse repo]] is just a [[repo]] from the point of view of the buyer. The {{gmraprov|Buyer}} buys and agrees to sell back later; the {{gmraprov|Seller}} sells and agrees to buy back later. | '''[[Reverse repo]]''': a [[reverse repo]] is just a [[repo]] from the point of view of the buyer. The {{gmraprov|Buyer}} buys and agrees to sell back later; the {{gmraprov|Seller}} sells and agrees to buy back later. | ||
Latest revision as of 17:29, 2 December 2019
What is a repo?
In a Nutshell™: A repo, or repurchase agreement, and its close relation the sell/buy-back[1], is a way of borrowing government bonds.
Documentation: Repos are most commonly documented under a 2000 Global Master Repurchase Agreement, the industry standard English law agreement, published by TBMA and ICMA
Structure: Repos are structured as a spot DVP sale at market, and a later DVP repurchase, also at market, of the same securities (hence, “repurchase”). In any case there is always a cash leg — by which the “Buyer” pays for the govvies — and a securities leg — by which the Seller delivers them. Contrast that with a stock loan where both the Loan and the Collateral leg are physical settlements of securities.
Term: Repo trades are usually very short term, typically overnight.
Reverse repo: a reverse repo is just a repo from the point of view of the buyer. The Buyer buys and agrees to sell back later; the Seller sells and agrees to buy back later.
- ↑ Or buy/sell-back - in any case known in the Global Master Repurchase Agreement as a Buy/Sell Back Transaction.