US Repo Market Fact Sheet, 2018

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

Summary

With a notional amount outstanding of $2.2 trillion, the repurchase agreement (repo) market is a vital, yet 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 operations. Repurchase agreements 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 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, 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, by dollar value, U.S. government securities account for approximately 51.4 percent of the most common collateral, agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs) account for 29.2 percent, and equities make up 7.6 percent.

Capital Markets

  • Robert Toomey, Managing Director, Assistant General Counsel
  • Justyna Podziemska, Assistant Vice President, Research
  • Andrew Greene, Intern, Research

See Also