Implied Repo Rate

AAA

DEFINITION of 'Implied Repo Rate'

The rate of return that can be earned by simultaneously selling a bond futures or forward contract and then buying an actual bond of equal amount in the cash market using borrowed money. The bond is held until it is delivered into the futures or forward contract and the loan is repaid.

INVESTOPEDIA EXPLAINS 'Implied Repo Rate'

The implied repo rate comes from the reverse repo market, which has similar gain/loss variables as the implied repo rate. All types of futures and forward contracts have an implied repo rate, not just bond contracts.

For example, the price at which wheat can be simultaneous purchased in the cash market and sold in the futures market (minus storage, delivery and borrowing costs) is an implied repo rate. In the mortgage-backed securities TBA market, the implied repo rate is known as the dollar roll arbitrage.

RELATED TERMS
  1. Canadian Overnight Money Market ...

    A measure or estimate of the rate at which major dealers are ...
  2. Retail Repurchase Agreement

    An alternative to regular savings deposits. Under a retail repurchase ...
  3. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  4. To Be Announced - TBA

    A term used to describe a forward mortgage-backed securities ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities. ...
  6. Reverse Repurchase Agreement

    The purchase of securities with the agreement to sell them at ...
Related Articles
  1. Price Volatility Vs. Leverage
    Options & Futures

    Price Volatility Vs. Leverage

  2. Commodities: The Portfolio Hedge
    Active Trading

    Commodities: The Portfolio Hedge

  3. Money Management Matters In Futures ...
    Options & Futures

    Money Management Matters In Futures ...

  4. Futures Fundamentals
    Insurance

    Futures Fundamentals

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center