What is a Term Repo?
Term repos are repurchase agreements that are structured to be in effect for a specific period of time. The one stipulation on the length of time associated with a term repo is that the period must be more than one calendar day. It is not unusual for a term repo to be used in such settings as a money market or a capital market. The term repo works in a manner that is very similar to any type of repurchase agreement. Essentially, the seller will agree to transfer ownership of specific securities to a buyer in exchange for a specific amount of cash. Inherent in the agreement is that the seller will repurchase those same assets from the buyer at a later date for a larger amount of cash. In the event that the seller is unable or unwilling to buy back the securities on the specified date, the buyer assumes full control of the assets and is free to offer them to other investors. A term repo usually sets the amount of cash required for repurchase in one of two ways. First, the repurchase amou
