The repurchase agreement, or “repo,” market is an obscure but important part of the financial system that has drawn increasing attention lately. On average, $2 trillion to $4 trillion in repurchase agreements – collateralized short-term loans – are traded each day. But how does the market for repurchase agreements actually work, and what’s going on with it? First things first: what exactly is the repo market? A repurchase agreement (repo) is a short-term secured loan: one party sells securities to another and agrees to repurchase those securities later at a higher price. The securities serve as collateral. The ... (full story)