Apparently this trade may have caused MF Global to go under!

As I understand, this trade is simply a repo that ends at maturity of the bond.

And so, I think that the repo rate (assuming zero haircut) must equal the bond yield to maturity?

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    $\begingroup$ What's your question? $\endgroup$ – rbm Feb 16 '17 at 16:25
  • $\begingroup$ see my last sentence.... $\endgroup$ – Randor Feb 16 '17 at 16:45
  • $\begingroup$ what is so unclear about the question? why did u "demote" it? $\endgroup$ – Randor Feb 16 '17 at 16:52
  • $\begingroup$ This will answer your question re MF Global specifically: blogs.reuters.com/felix-salmon/2011/11/01/… $\endgroup$ – noob2 Feb 16 '17 at 17:37
  • $\begingroup$ it says there "the rate at which it was borrowing money was lower than the coupon payments on the European sovereign bonds." but to me, it seems this implies an arbitrage opportunity () so the repo rate should go up untill it matches the bond yield and then there would be no more arb $\endgroup$ – Randor Feb 16 '17 at 17:59

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