In fixed income, or in any other products for that matter, borrowing an asset is essentially shorting the asset. As a result, you would see hard-to-borrow names where the borrow rates are much higher than normal repo rates.
I have recently heard some people mentioning the phrase "repo out a bond" interchangeably with shorting a bond, which I have a hard time wrapping my head around:
When you are repoing out a bond, I take it that you are a repo seller and you are borrowing cash and placing the bond as collateral, which you will buy back at a agreed price at the end of the contract. If you are buying the bond back at a pre-arranged price, it doesnt make sense that you will benefit from any decrease of MTM (unless a default happens during the repo period), thus you cannot possibly be shorting the bond and rather would be long throughout the entire contract.
Can anyone help point out what I am missing? Perhaps the person using the phrase is incorrect?
Also, if you have some insight into what exactly happens behind the scenes when a market-making desk at a bank "shorts" a bond, that would be great as well. The way I currently understand it is that the market-making desk would go the the repo desk and borrow the bond.