The Repo Market: What It Is, and Why Everyone Is Talking About It Again

After repo rates spiked, analysts are asking why a crucial part of the financial system is coming under pressure this week

Traders are scrambling to discern what caused an unexpected rate spike in a vital but murky part of the financial system—the market for repurchase agreements, known as repo.

What is the repo market? A repo is when one party lends out cash in exchange for a roughly equivalent value of securities, often Treasury notes. This market exists to allow companies that own lots of securities but are short on cash to cheaply borrow money. And it allows parties with lots of cash to earn a small return while taking little risk, because...

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