Questions tagged [repo]

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Is repo-ing out a bond the same as shorting the bond?

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 ...
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15 views

Cash flow of stock lending transaction

I cannot find the mechanics of a stock lending transaction, even though it is a very basic operation. I cannot see how the interest is paid at maturity. Example: I borrow 1 unity of stock $S$ at $T_0$,...
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Repo P&L - How to calculate

Total newbie here, I am struggling to calculate the correct repo PL on a transaction. Basically I have a GBP Bond which I repo out as below: UKT 2.75 09/24 (EK1093963) so (41,395,983) @ 103.57 and I ...
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1 answer
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How does Repo enable zero cost leverage?

There have been numerous headlines the past two years where we learn that quant funds are engaging in algorithmic basis trades (aka relative value trades) between Spot Treasuries and Treasury Futures, ...
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Why is there Risk Weight for Repo

In the BIS website (https://www.bis.org/basel_framework/chapter/CRE/22.htm?inforce=20220101&published=20191215#paragraph_CRE_22_20220101_22_36), it is stated that: 22.38 Repo transactions that ...
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5 votes
0 answers
113 views

Why did the month-end (ir)regularities in Effective Federal Funds Rate (EFFR) disappear in 2018?

The Federal Funds rate has exhibited regular drops at month ends since beginning of 2015. (Source: FRED https://fred.stlouisfed.org/series/EFFR) Some studies (e.g., https://www.mdpi.com/1911-8074/14/...
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0 answers
54 views

When I borrow a bond, do I pay owner the coupons?

Or do I get to keep them for the duration of the repo transaction?
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25 views

Derivative balance sheet data for Eurozone banks

As a follow-up to my recent answer, is there a similar banking regulatory form such as USA’s FR Y-9C or FFIEC 101 at Eurozone level? National data level would be useful too. Data should be reported at ...
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7 votes
1 answer
403 views

Why are T-bills yielding lower than the reverse repo rate?

With another US debt ceiling debacle looming, I just realized something that runs against my intuition: Many of the Treasury bills maturing in 6 months (with the exception of the ones maturing near ...
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3 votes
2 answers
284 views

Why are MMFs willing to lend at 0% through reverse repo?

The reverse repo (RRP) rate is at/near zero lately, but RRP usage is still quite high. Why are people (money market funds?) willing to lend at 0% in the repo market? Is it because of regulatory ...
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2 votes
3 answers
487 views

Carry and Pull to Par of a bond

I am of the understanding the true carry of a bond is yield - repo rate. And not simply coupon + repo cost because this doesn’t ...
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0 votes
1 answer
67 views

Can both good buying and good selling cause a bond to go special on repo?

A bond is known to go special when its repo rate gets particularly low relative to the GC (General Collateral) repo rate. In my mind, this can be caused by two scenarios: 1. Institutional interest to ...
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1 vote
1 answer
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China carry trade, borrow in the repo market and invest in govies

"Excess funds in the banking system had juiced leverage in financial markets by driving China’s overnight repo rate to a record low of 0.59% in December. The cheap short-term financing enabled ...
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  • 341
2 votes
1 answer
122 views

Funding foreign asset purchase with repo

https://www.bis.org/publ/qtrpdf/r_qt1709e.pdf extract from page 38 An investor wants to buy a foreign currency security with domestic cash but does not wish to run FX risk. Then, three transactions ...
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2 votes
1 answer
134 views

Swap Spread Arbitrage & Rates/STIRT Vol

Concerning the classic swap spread arbitrage trade where you (as far as I understand it): Buy a treasury and borrow in GC repo, paying repo rate and funding the haircut in short term unsecured ...
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2 votes
1 answer
122 views

Operational aspects of repo funding trades

It is widely known that repurchase agreements ("repos") are regularly used by market participants as a mean to fund long/short positions in a certain asset, in particular for derivative ...
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1 vote
1 answer
118 views

Negative Carry when Yield Curve is Downward Sloping

I am currently reading "The Treasury Bond Basis", and have a question regarding negative carry. The book states that the carry of a vanilla treasury bond will be negative when the yield ...
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1 vote
2 answers
437 views

Repo sensitivity

Hope u're all doing well in this sanitary crisis. I have a question concerning repo sensitivity of basket/index derivatives regarding market making for instance. The argument to compute such a repo ...
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0 votes
1 answer
89 views

Calculate borrow/loan or repo rate

I was given this question on interview and couldn't find an answer in time (it is a software developer job in a place that deals with options). Can someone explain how to do this or point me to a good ...
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1 vote
1 answer
420 views

Valuation of a REPO

I thought I had a pretty good grasp on how to calculate this but I'm getting questioned on it and just want to be sure I'm not getting it mixed up. In my notation you enter into the repo contract at $...
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2 answers
75 views

Bond price and credit exposure in Repo agreement

The answer is A. Could someone explain to me the reason that higher bond price reduces the credit exposure to the bank? Why is B incorrect?
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4 votes
1 answer
618 views

Repo vs Reverse Repo terminology

This might be a basic question. But I am still confused about the terms. Please kindly suggest about my understanding of repo vs reverse repo and repo rate vs reverse repo rate with their applications ...
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0 votes
0 answers
45 views

Equity finance and primary brokerage and their products

I was in the project working on the asset classes known as EF/PB, which is short for Equity Fiance / Primary brokerage, I understand that Equity finance is more or less about securities lending, and ...
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1 vote
0 answers
58 views

How do Treasury bill/coupon settlements affect reserves?

Back in September when the repo market exploded, causes were attributed to corporate tax payments and T-bill settlements. Was hoping someone could help elaborate further on the mechanism as to how T-...
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2 votes
1 answer
199 views

Repo- A few questions [closed]

A few questions which could be related to each other, to help me gain familiarity with repo. These are accompanied with my guess. If anyone can explain in layman's terms (this is new to me). 1) I ...
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