A mix of funding that involves both a direct repo and a triparty repo. This situation arises when the holder of a sizable long position in a Treasury bond finances it in part by resorting directly to the repo market, while financing the remainder with “unfriendly financing” such as in a triparty repo. More specifically, the security holder finances a substantial portion of the position in a hard-to-find security (general collateral) at the higher general collateral rate rather than let the security trade in the less expensive repo market (at the lower specific collateral rate). Through a triparty repo agreement, a trader can be assured by a custodian that the collateral posted by the borrower is immobilized and will not be recirculated in the market.
Finance
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