A type of repo in which the underlying security is a fixed-income instrument (such as government or corporate bonds), as opposed to repos that have other types of securities/ assets as underlying (e.g., equity repo). The party receiving cash (seller of underlying fixed-income instrument) sells the securities to a lender (the buyer/ the party paying cash) and agrees to repurchase the same securities at a later date. The lender expects to get the repo rate– i.e., the difference between amount the repo loan (the cash lent) and paid-back cash expressed as a percentage.
August 27, 2024
