The basic form is to hand over bonds and receive funds, then return the funds on an agreed date and get the bonds back. In Japan there are two forms: the gensaki transaction, a sale made on the condition that the opposite transaction is carried out after a fixed period, and the cash-collateralized bond lending transaction (genta repo), in which bonds are lent against cash as collateral1. The Bank of Japan regards the two as broadly the same in economic terms, because in both the funds and the bonds change hands for a fixed period1.

In a cash-collateralized bond lending transaction, the bond borrower pays a lending fee and the bond lender (the receiver of the collateral cash, which is the money handed over as collateral) pays interest on the collateral cash. The difference between the two is the repo rate. A transaction that does not fix which bond is lent is a general (GC) transaction, and one that specifies the bond is a special (SC) transaction2. The glossary of Japan Exchange Group calls the cash-collateralized bond lending transaction the "Japanese-style repo" to distinguish it from repos overseas2. How overseas transactions work is not covered here.

Notes

  1. Bank of Japan, Financial Markets Department, "本邦レポ市場のトレンドと近年の特徴点" (Trends and Recent Features of Japan's Repo Market) (BOJ Review 2025-J-7, in Japanese), footnote 4. It states that there are two forms, the gensaki transaction and the genta repo, and that they are broadly equivalent from an economic viewpoint. ↩ ↩2

  2. Japan Exchange Group, "レポ取引" (Repo transaction) (glossary, in Japanese). Paragraph 1 (Japanese-style repo), paragraph 2 (lending fee, interest on collateral cash, repo rate), paragraph 3 (GC and SC transactions). ↩ ↩2