The Reverse Repo Market, Explained

Why are we hearing so much about the repo market in the news recently?

Lets talk about everything that’s going on in the reverse repo market – what some of their experts are calling for and how to think about it for all of us gamblers who like betting on the stock market.

In plain terms, the repo market is where financial institutions like banks, broker dealers, and hedge funds borrow cheaply from parties with lots of spare cash like money market funds. The latter are able to make low-risk loans typically collateralized by government securities which are then repurchased the next day for a few basis points than what they were originally sold for.

In the reverse repo market, banks and money market funds which are not getting any yield in the repo market can now park their excess reserves with the federal reserve overnight and receive a short-term funding rate.

Information for this briefing was found via Bloomberg, Edgar, Refinitiv, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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