The Repo Markets

One of the largest segments of the money markets worldwide is the market in repurchase agreements or repo. A most efficient mechanism by which to finance bond positions, repo transactions enable market makers to take long and short positions in a flexible manner, buying and selling according to customer demand on a relatively small capital base. Repo is also a flexible and relatively safe investment opportunity for investors such as money market funds and corporate and local authority treasurers. The ability to execute repo is particularly important to overseas firms who might not have access to a domestic deposit base; where no repo market exists, funding is in the form of unsecured lines of credit from the banking system, ...

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