{
  "id": 10429420,
  "title": "Who’s Borrowing and Lending in Repo Markets?",
  "url": "https://urgent.news/2026/09/28/whos-borrowing-and-lending-in-repo-markets",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-09-28T11:00:00.000Z",
  "source": {
    "name": "Liberty Street Economics",
    "slug": "liberty-street-economics",
    "url": "https://libertystreeteconomics.newyorkfed.org/2026/09/whos-borrowing-and-lending-in-repo-markets/"
  },
  "original_language": "en",
  "account": "Repo markets are a crucial part of the U.S. financial system. In a repurchase agreement, or repo, one party sells securities for cash with the agreement to repurchase the same or similar securities at a later date. These transactions serve the dual purpose of providing funding and short-term investment opportunities for financial institutions, as well as a marketplace for obtaining specific securities. The U.S. repo market is estimated to be around $13.5 trillion daily, accounting for 40 percent of U.S. GDP (OFR 2026).\n\nKey factors influencing repo rates include the type of collateral, maturity, counterparty, haircut percentage, and clearing process. Roughly 70 percent of repos are collateralized by U.S. Treasury securities, with most having an overnight maturity (OFR 2025). Around 60 percent of repos are cleared through a central counterparty or third party, while 40 percent are cleared directly between the buyer and seller (OFR 2025).\n\nThe concept of a repo can be traced back to the early 20th century. Following the collapse of several dealers in the 1980s and rising interest rates, the size and contracting conventions of the repo market changed dramatically. A significant convention is that repos involving Treasury and federal agency securities are exempt from the automatic bankruptcy stay, allowing cash lenders to avoid the delay and uncertainty of the bankruptcy process if the borrower defaults during the repo.\n\nThere are two primary reasons for entering a repo transaction: to borrow cash or to invest cash and earn a return. The former makes a repo similar to other short-term money market instruments such as federal funds, Eurodollars, or commercial paper. However, unlike these markets, repos are collateralized, reducing the risk for the cash lender. General collateral repos, or GC repos, are a type of repo where the cash lender receives any security that meets specified criteria, making it a funding market for cash borrowers and an investment opportunity for cash lenders seeking competitive rates.\n\nRepo transactions can also be used to acquire specific securities in high demand. These securities, known as \"specials,\" trade at a lower rate relative to the prevailing GC rate, benefiting cash lenders seeking to obtain a scarce asset at a competitive return. In essence, repos are akin to a security lending transaction against cash collateral rather than a collateralized loan. Repos primarily use fixed-income instruments as collateral and typically do not grant the lender the right of early recall of the securities.",
  "summary": "Repo markets play a vital role in the U.S. financial system. In this three-part series, we examine who participates in these markets, what trade-offs influence how different repo segments are structured, and why repos matter for monetary policy. Today's post introduces repo transactions, focusing on the major private-sector participants and why they engage in these markets.",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}