Nice write-up. What I never get is why use a Repo to finance it?
You have to own the bond already to repo it and in Step 1 you use a Treasury as collateral to get your cash minus the haircut to purchase a Treasury again in Step 2.
in the first stage you pledge whatever you have as collateral (these may have different maturity coupons), in the second stage you buy a single type of bond.
Nice write-up. What I never get is why use a Repo to finance it?
You have to own the bond already to repo it and in Step 1 you use a Treasury as collateral to get your cash minus the haircut to purchase a Treasury again in Step 2.
in the first stage you pledge whatever you have as collateral (these may have different maturity coupons), in the second stage you buy a single type of bond.
Well done. 🙏