Overnight repo

The term of the repo an overnight repo is inherently lower risk than a one-year risk. 

The maturity of the majority of repo transactions are between overnight and three months, although trades of six months and one year are... 

A repo that does not have a specified fixed maturity date is known as an open repo. In an open repo the borrower of cash will confirm each morning that the repo is required for a further overnight term. The interest rate is also fixed at this point. If the borrower no longer requires the cash, or requires the return of his collateral, the trade will be terminated at one day s notice. 

Jumbo issues generally trade with the euro overnight rate (EONIA), although the smaller-sized issues sometimes go special. The offered side in repo is dominated by investment funds and the mortgage bank issuers themselves. 

The size of the repo market reflects the size of the cash market in government bonds, which is the largest in Europe. The instruments used in the market are listed in Exhibit 10.26. Securities marked with a are listed by ISMA as Euro GC securities. Most transactions are one-week maturity, while, unusually for repo, overnight trades are rarer. This may be because stamp duty is chargeable at a flat rate on domestic deals, and so this is an incentive for market participants to undertake longer-dura-tion repo trades. 

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