Repurchase Agreement - Repo

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DEFINITION of 'Repurchase Agreement - Repo'

A form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.

For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.

BREAKING DOWN 'Repurchase Agreement - Repo'

Repos are classified as a money-market instrument. They are usually used to raise short-term capital.

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RELATED FAQS
  1. What is the primary use of reverse repurchase agreements?

    The Federal Reserve utilizes a reverse repurchase agreement as one of two instruments used for the primary purpose of offsetting ... Read Full Answer >>
  2. Under what circumstances would someone enter into a repurchase agreement?

    In finance, a repurchase agreement represents a contract between two parties, where one party sells a security to the other ... Read Full Answer >>
  3. In a repurchase agreement (repo) why is a longer tenor more risky?

    A repurchase, or repo, agreement is a financial contract in which one party agrees to sell a security to a second party and ... Read Full Answer >>
  4. What is the difference between a term and open repurchase agreement?

    The major difference between a term and an open repurchase agreement (repo) is in the term or tenor. In a term repo, the ... Read Full Answer >>
  5. Who are the key players in the bond market?

    The bond market can essentially be broken down into three main groups: issuers, underwriters and purchasers. The issuers ... Read Full Answer >>
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    The type of bond determines where you can purchase it, so you need to decide which type of bond you would like to purchase ... Read Full Answer >>
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