What is Overnight Repo?

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Accepted Answer

An Overnight Repo, or overnight repurchase agreement, is a form of short-term borrowing for dealers in government securities, where the dealer sells the underlying security, typically a U.S. Treasury, to an investor and agrees to buy it back the following business day at a slightly higher, pre-determined price.

Overnight Repo

What is Overnight Repo?

What is the fundamental mechanism of an Overnight Repo, and how does it serve as a critical tool for central banks in managing systemic liquidity and interest rates?

How do U.S. Treasury securities function as the primary collateral in the Overnight Repo market, and what is the significance of this high-quality collateral for market stability?

Why is the Overnight Repo market a foundational concept for the tokenization of Real World Assets (RWA), particularly in the context of creating stable, yield-bearing digital assets?

What are the key differences between an Overnight Repo and a Term Repo, and what are the primary risks associated with participating in the overnight repurchase agreement market?

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