The Repo Handbook

The Repo Handbook, Second Edition presents an overview of repo vehicles and markets with sufficient depth for those seeking detailed explanations. In three parts it demonstrates how these secured loans fit into global capital markets and why they account for up to 50% of daily settlement activity in non-US government bonds worldwide. This new edition replaces old examples and introduces new developments, such as structured finance repo and associated topics such as Basel II regulatory rules. In addition, 12 of 18 chapters feature new sections and 4 have been substantially rewritten. The UK gilt and US Treasury repo markets are explored through worked examples, and there are new sections on funding arbitrage trades, risk exposures, and regulatory capital. It also places repo in context within bank asset-liability management and trading techniques, illustrating repo use across a wide range of applications in the global money markets. Rarely mentioned in the financial press because of the simple, straightforward nature of the instrument, repo was often the only funding source available to banks during the last quarter of 2008 and the first in 2009. This book, written by a trader, will draw new attention to this valuable and efficient funding and investment product.

Describes repo instruments, which appeal to market participants because of their simplicity and malleabilityExplains the institutional treatment of repos, especially in terms of risk, accounting, tax and legal issues, and equity repoDetails the government bond basis, implied repo rate, and basis trading

Part I Repo and the debt capital markets 1. Intro to repo 2. Market background: Bond markets I 3. Market background: Bond markets II 4 .Money markets 5. The repo instrument 6. Uses and economic functions 7. Structured repo and the Total Return Swap 8. Trading and Hedging 9. ALM 10. Gilt and US Treasury repo

Part II The treatment of repo 11. Risk 12. Accounting, Tax and Capital 13. Legal 14. Netting 15. Equity repo

Part III The government bond futures contract, the cheapest-to-deliver, basis trading and the implied repo rate 16. The Bond Basis I 17. The Bond Basis II 18. The Bond Basis III