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In a repo agreement, Bank A, needing cash quickly, sells its bonds to Bank B, which has excess cash. Bank A commits to repurchase the bonds at a higher price, usually the next day, providing Bank B a profit. For Bank A, this transaction is a repo, while for Bank B, it is a reverse repo. Repo transactions are utilized by various entities, including mutual funds, hedge funds, and central banks, as a means to manage liquidity effectively. This arrangement allows Bank A to access cash rapidly while Bank B benefits financially from the transaction.