Hi,
I am not sure if this is addressed in later readings, but I’m basing my question on the intro reading on Fixed Income. If a coupon-paying bond is pledged as a collateral in a Repo agreement, during the term of the Repo when a coupon becomes due, who gets the payment? The original bondholder or the other party in Repo?
Thanks!
If you pledge an apartment building as collateral for a mortgage, who gets the rent?
If you are asking for a repo service (you receive the money and you give a collateral in exchange), you set the right to the other party to keep your bond in case you could not repay the short term debt, but only that. The remaining rights are still on you, so you will receive the entire coupon payment.
As I said . . . .
The homeowner of course.
There you go.
Thanks. That was helpful. I was a bit confused, because I was not sure if the Repo entailed transfer of temporary ownership rights (and hence entitlement to coupons), as opposed to a regular loan with pledged collateral.
It seems that you have it nailed.
Good.