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Understanding Repurchase Agreements

by Mark Stockley, Managing Director and Head of International Cash Sales, BlackRock

The repurchase agreement market is one of the largest and most actively traded sectors in the short-term credit markets and an important source of liquidity for money market funds and institutional investors. Repurchase agreements (also commonly referred to as repo agreements) are short-term secured loans frequently obtained by dealers (borrowers) to fund their securities portfolios, and by institutional investors (lenders) such as money market funds and securities lending firms, as sources of collateralised investment.

In this article, we look to explain the fundamentals of this important sector and provide insight into its usage and operation.