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Liquidity and treasury

Repurchase agreement (repo)

A short term secured loan where one party sells securities and agrees to buy them back later at a slightly higher price.

In a repo, a borrower sells a security, often a government bond, for cash and agrees to repurchase it shortly after at an agreed higher price. The difference is effectively the interest, known as the repo rate.

Repos are a central tool for short term funding and for managing liquidity, and they are how many central banks add or drain cash from the banking system.

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