US Repo Market Fact Sheet, 2016

The $2.2 trillion daily turnover in the repurchase, or repo, market is a vital, but not always well understood, part of the U.S. financial system. The repo market represents a liquid, efficient, tested and safe way for firms to participate in a short-term financing arrangement, providing funding for their day-to-day business. Repurchase agreements, or repos, are a sale of financial assets combined with a promise to repurchase those assets in the future (in many cases, the repurchase is agreed for the following business day). These arrangements have the economic characteristics of a secured loan – cash vs. collateral – and are used by short-term institutional cash investors as a secured money market instrument and by dealers as a way to finance long positions in securities.

While a broad array of assets may be financed in the repo market, the financial assets most commonly used include U.S. government and Federal agency securities, high quality mortgage-backed bonds and corporate bonds and money market instruments. Recent data for the tri-party repo (a form of repo that uses an agent to maintain cash and securities accounts for both parties) market, which represents a significant part of the entire U.S. repo market, indicates that U.S. government securities account for approximately 48.5 percent by dollar value of the most common collateral types, agency mortgage-backed securities and collateralized mortgage obligations account for 30.1 percent, and equities make up 7.1 percent.

About the Report

An annual update and overview to the U.S. repo market.

Credits

Capital Markets

  • Managing Director, Assistant General Counsel: Robert Toomey
  • Associate, Capital Markets: Robert Rogerson
  • Senior Associate, Research: Justyna Podziemska
  • Intern, Research: Arun Kalyanaraman