repurchase agreements (repos)

A repurchase agreement (repo) is a short-term loan where one party sells securities, like government bonds, to another with a promise to buy them back later at a slightly higher price. The seller gets immediate cash, while the buyer gains a temporarily secured investment. Repos are commonly used by financial institutions to manage liquidity and funding needs, providing a quick, low-risk way to borrow or lend money with the securities serving as collateral. Essentially, it's a temporary sale and repurchase agreement that helps facilitate smooth financial transactions in the market.