Income From Repurchase Agreement

In the event of default by the counterparty, the absence of an agreement may reduce the legal position on the recovery of collateral. Any coupon payment on the underlying security during the term of the sale/redemption is generally returned to the purchaser of the security by adjusting the cash paid at the end of the sale/redemption. In a repo, the voucher is immediately sent to the security seller. A repo is a form of short-term borrowing for government bond traders. In the case of a repo, a trader sells government bonds to investors, usually overnight, and buys them back the next day at a slightly higher price. This small price difference is the implicit overnight rate. Deposits are usually used to raise short-term capital. They are also a common instrument for central banks` open market operations. . .

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