REPO (Sale and Repurchase Agreement) in Financial Markets
The REPO, or sale and repurchase agreement, is a contract in which a legal entity or a mutual fund temporarily transfers securities (such as stocks or bonds) to another legal entity or mutual fund. The particularity of this agreement lies in the irrevocable commitment of the transferor to repurchase these assets, and of the transferee to return them, at a predetermined price and date.
How REPO Works
In practice, this is a secured loan operation, where the transferee lends cash, and the transferor borrows by providing securities as collateral. The interest rate, freely negotiated between the parties, fluctuates based on market liquidity conditions. When liquidity is scarce, interest rates tend to rise, and vice versa.
Market Trends
After a record year in 2024, with a volume of 70.110 billion dinars, 2025 saw a significant decline, with a volume of 51.002 billion dinars. The number of operations also decreased, from 13,735 at the end of 2024 to 10,466 a year later. Maturities of 8 to 90 days dominate, representing 77.5% of exchanges. The decline in interest rates affected all maturities without exception.
Analysis and Outlook
Given that the size of the portfolios held by banks remains significant, and there are still sufficient transactions on government securities, this decline indicates a less pronounced need for liquidity, explained by its availability on the one hand, and the tightening of credit conditions on the other. It is clear that in times of economic uncertainty, players prioritize the safest counterparties, reducing the growth of the overall volume of financing.
Forecast for 2026
For 2026, we believe that the volume will stabilize. There is no indication of a deterioration in the availability of liquidity for banks or an acceleration in credit demand. This trend is worth monitoring.
