US Treasury repo primer: 2026 edition

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US Treasury repo primer: 2026 edition

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US Rates

Primer

Repo is the lifeblood of the financial system 06 July 2026

The US Treasury repo market is a core piece of market plumbing. It allows investors to Rates Strategy

borrow or lend cash against high-quality collateral, supports Treasury market liquidity, United States

and provides the transaction base for the Fed’s SOFR. Repo rates are driven by the

Mark Cabana, CFA

balance between cash available for investment and collateral that needs to be financed, Rates Strategist

with dealer balance sheet capacity acting as an important constraint on intermediation. BofAS

mark.cabana@bofa.com

A repurchase agreement (or repo) is the sale of a security with a commitment by the Katie Craig

Rates Strategist

seller to buy back the security at a specified price on a pre-determined date. A repo is BofAS

essentially a collateralized loan but faces different treatment under bankruptcy. When katie.craig@bofa.com

the repo expires, the borrowed funds are returned to the lender (plus interest) and the US Rates Research

BofAS

borrower is given the collateral back. The interest rate is imbedded in the repo price of +1 646 855 8846

the cash borrower. Firms use repo to invest or borrow cash against collateral. See Team Page for List of Analysts

Dealers remain central to the transmission of repo markets. Leverage ratio, GSIB, and

other capital constraints limit the amount of intermediation dealers can provide,

especially around reporting dates. FICC sponsored repo has become an important

workaround because it can allow dealers to more efficiently manage balance sheet.

The next structural change is broader central clearing. The SEC clearing mandate is

expected to push more UST repo activity into central clearing by June 2027. The