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

Repoing out a bond is not shorting the bond. Repoing out is essentially collateralized borrowing. One is selling the bond and agreeing to buy the bond back at an agreed upon price. The difference ...
AlRacoon's user avatar
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5 votes

Operational aspects of repo funding trades

I believe the example is merely for illustrative purposes. You shouldn't be able to fully fund a position in real life. The funding of (repo) and the bond purchase need not be with the same ...
AlRacoon's user avatar
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4 votes

Negative Carry when Yield Curve is Downward Sloping

Repo rates will be very close to short-term treasury rates so "the yield curve is downward sloping" and "bond yield minus repo rate is negative" mean very nearly the same thing. ...
Chris Taylor's user avatar
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4 votes
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Repo vs Reverse Repo terminology

A repo transaction and a reverse repo transaction are opposite sides of the same transaction. A capital market participant enters into a "repo" with a counterparty, who is in a "reverse repo". A ...
AlRacoon's user avatar
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4 votes
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Calculate borrow/loan or repo rate

I believe, they are testing two things here: That you know the Put-Call Parity (with dividends) That you can successfully rearrange an equation The Put-Call Parity with continuously compounded ...
jmh's user avatar
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4 votes
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Why are MMFs willing to lend at 0% through reverse repo?

"in general, why would anyone be willing to enter a reverse repo at 0%?" There's a long explanation at the site Liquidity Matters in their piece "A Band-Aid Known as Reverse Repo", ...
user42108's user avatar
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3 votes

Funding foreign asset purchase with repo

It means: purchase the foreign asset and simultaneously use this asset as collateral to borrow money in the same currency. For example, you are a USD investor. You buy a Japanese Government bond ...
dm63's user avatar
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3 votes
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Can both good buying and good selling cause a bond to go special on repo?

From my experience you are thinking about this the right way, although I think the positions of dealers are somewhat of a red herring here. Dealers aim to run roughly flat positions in recently ...
dm63's user avatar
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3 votes
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Why are T-bills yielding lower than the reverse repo rate?

Yes, it is definitely because of market segmentation. On one hand there are many funds, central banks, etc. who can buy treasury bills and cannot engage in repos. On the other hand, entities which ...
Si Chen's user avatar
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2 votes
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Valuation of a REPO

As you have been advised, the value of the bond at $t_1$ is not relevant. This is because in any repo, the amount of bonds posted changes on a daily basis to maintain the haircut at the correct ...
dm63's user avatar
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2 votes
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Bond price and credit exposure in Repo agreement

A: The hedge fund is being lent bonds as collateral for the cash they are giving out. So, the net exposure to the bank is (cash out minus value of bonds being posted). Hence the answer. B: ...
dm63's user avatar
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2 votes

How does Repo enable zero cost leverage?

They mean the return after repo costs. So for example, if you can buy the bond and sell the future for an implied rate of financing of 15bp and the market charges you 12bp, you will make 2bp on the ...
JoshK's user avatar
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2 votes

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

A slightly different point of view is provided by Quentin Vandeweyer, of the U. of Chicago: There is something odd in today’s money markets. T-bill and repo rates are negatives and the Fed’s ON repo ...
nbbo2's user avatar
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2 votes

Carry and Pull to Par of a bond

I'd say coupon - repo is strictly cash flow and coupon + pull to par + rolldown - repo is the "carry", most often referenced in fixed income especially in liquid rates. We could replace ...
Edward Watson's user avatar
2 votes

Repo/Fwd/Spot/Bond Futures

This is my general approach for analysing repo specific bonds, or bonds that gone "special" on repo. The Spot Price Suppose firstly that we have 3 bonds, a 1y, 2y and 5y with different ...
Attack68's user avatar
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1 vote

Repo impact on Bond Future Basis

You are correct, these are the same effect, although there is a slight twist. If a bond goes special, its price (and therefore the gross basis) will increase by the expected specialness measured over ...
dm63's user avatar
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1 vote
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Question about 'reversing in' in repo markets

So the "reverse repo" market has a bid-offer expressed in rates. If you are selling securities and agreeing to buy them back, you are borrowing cash (or lending securities) and are looking ...
AlRacoon's user avatar
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1 vote

Implied repo rate and slope of the yield curve

I think it just means the implied repo rate is higher than the actual repo rate. Explanation: if you are long bonds and short futures, what do you have? Well assuming that the bond is the CTD and the ...
dm63's user avatar
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1 vote

Implied repo rate and slope of the yield curve

Think he means for holding onto your basis for longer in a positive sloped curve the irr should increase. This is just because you will carry positively. Carry is measured versus your repo. If your ...
user68819's user avatar
  • 360
1 vote

China carry trade, borrow in the repo market and invest in govies

You are right that for any carry trade to be profitable, cost of funding or leverage cost using repo has to be lower than the investment yields (in this case yields on sovereign bonds). However, for a ...
toing's user avatar
  • 233
1 vote

Repo sensitivity

Here are a few points that might help you get a better sense of all the bells and whistles in your question: 1) Structure of Sell Side Desks From a Sell Side perspective (Market Maker) its common to ...
Mercadian's user avatar
1 vote

Repo sensitivity

Borrowing from another department or borrowing from the market face the same issues: You have to get capital from somewhere; raising that capital has a cost; and, other uses of that capital may offer ...
kurtosis's user avatar
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1 vote

Repo- A few questions

FRB NY website would be a good place to start answering those questions given they implement the bailouts/money pumping/OMOs + TOMOs. As to 6), corporate treasurers invest cash in the money market ...
user42108's user avatar
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