Trade 1
ABC Bank plc
ABC repo trading ticket
Counterparty Commercial Bank plc
Trade date 4 January 2000 Settlement date 5 January 2000
Collateral UKT 5% 2004 Nominal amount £50,000,000
Repo rate 149
Term 33 days (From 5/1/00 To 7/2/00)
Clean price 95.25
Accrued 0.3961749 (5.00/2 × 29/183) or (5.00 × 29/366)
Dirty price 95.6461749
Settlement amount (wired amount) £47,823,087
Repo interest £237,805.21 (£47,823,087 × 150 × 33/365)
Termination money £48,060,892.21
1. Commercial Bank plc is earning Libor — 15 bps, but with AAA security against its investment.
2. It is 10 bps lower (the CD is at 5.60%). Repo investments usually yield about the same or less than investment grade unsecured paper, government bond repo always less due to the quality of security.
3. Investors often have a limited amount of credit lines for unsecured investment counterparties. In addition, the repo offers 30-bps higher return than the T-Bill for what is still essentially government risk. Finally, buying paper can have mark-to-market implications and associated interest-rate risk, which Commercial Bank plc may not desire, and which requires different monitoring and settlement systems.
4. The running yield is 5.227% (this is an approximation and uses the dirty price). In effect, the net funding ...

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