repo rates

determine, following, material, comment, someone

i was working on the fixed income material last night and i was thining i can spit out some info on repos for the exam but i dont really know what they are (real life wise)

can someone give me a 2-3 line plain language expanation, or just comment of the following,

-its my understanding that, you have money lender who takes will loan you money, and then dependent on the collateral (liquid/special/how delivered...) they will determine a rate to charge you on the lent money?

-what is the collateral (securities, cash..)

Windjam

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发表于 2011-7-11 19:51 | 只看该作者

Our firm uses repo's to park cash overnight, and receive the overnight repo rate. It's a little better than the Rfr, but not much. Basically all extra cash is swept into an account and invested in the repos. we receive treasuries or agency securities for collateral.

We lend the bank our extra cash wich is added to their requred reserves, we get the overnight repor rate for this loan, which is backed by their colateral. The bank we loan to is the borrower of these funds.

I've never seen an overnight repo issued by anyone other than a bank (maybe it happens, but I don't think so) I believe the reason they issue repos is to secure cash for their required reserves. We lend the money in order to get a very small spread above the Rfr on our excess cash.

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