Repo (Repurchase Agreement)

A Repurchase Agreement (Repo) is a short-term financial transaction where one party sells a security, typically a high-quality government bond or Treasury security, to another party and simultaneously agrees to repurchase the same security at a specified later date for a slightly higher price. This arrangement functions as a collateralized loan, providing short-term liquidity to the seller while offering a secure, low-risk investment for the buyer, and is a cornerstone of the global money markets, with the U.S. market alone averaging over $12 trillion in daily exposures.