Repo and Reverse Repo
Definition
A repo is a single agreement to sell a bond or other asset and buy it back again from the same counterparty for settlement on a later date at an agreed price.
A reverse repo is the same transaction viewed from the counterparty’s point of view – a single agreement to buy a bond or other asset and sell it back again to the same counterparty for settlement on a later date at an agreed price.
When speaking generally, without being specific about which way round one is in the transaction (i.e. buying first or selling first), the term ‘repo’ is used rather than ‘reverse repo’.
How are they used?
As it is understood from the outset that the first settlement in a repo will be reversed later, it is clear that both parties ...
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