which types of securities are used in a repo agreement 
high quality debt instruments with little risk of default are most commonly used such as government bonds corporate bonds or mortgage backed securities the collateral needs to have a predictable value reflect the value of the loan and be easy to sell in the event the loan isn t repaid on time the collateral doesn t need to be debt other assets can be used including for example equity market indexes 29the bottom linea repurchase agreement or repo is a short term lending instrument that involves a bank selling securities usually government bonds or other debt instruments with steady values to an investor and then repurchasing them a short time later at a slightly higher price repos essentially act as short term collateral backed interest bearing loans with the buyer playing the role of lender the seller as the borrower and the security as the collateral in the 2020s the u s federal reserve became a significant player in the repo market its reverse repo facility put a floor underneath short term rates through this the fed takes in cash from eligible firms in loans collateralized with treasurys it holds in the mid 2020s the fed has been slowly shrinking its bond holdings and also its part in the repo market after a massive move into it during the pandemic era 