Repo Market

Does anyone here deal hands-on with repurchase agreements? My firm is considering investing in an institutional money market fund that purchases repos backed by U.S. Treasuries. I have a couple of specific questions: 1. Does the firm borrowing the funds put up any cash margin? 2. Are repo agreements marked-to-market? If so, how frequently?

  1. The firm borrowing the funds puts up T-bills as collateral. They overcollateralize these loans, so perhaps they borrow $100mm and provide $102mm worth of T-bills as collateral. 2) The types of repos you are describing are typically overnight repos, meaning they mature within one day. Not much time to mark-to-market in that case.

Tobias - Thanks for the info. Do mark-to-markets occur on repos > 1 day?

they should be marking the collateral every day on term trades. honestly with government repo you’re good to go, one of the safer products out there. the more gov’t repo in your money funds the better, there is a lot worse stuff they could be buying. wise to do your DD though.