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In a repurchase agreement (repo), Bank A needs cash quickly and owns bonds, while Bank B has excess cash. Bank A (the dealer) sells its bonds to Bank B and agrees to repurchase them later, typically the next day, at a higher price. This transaction provides Bank A with the cash it requires, while Bank B earns a profit from the price increase when Bank A buys back the bonds. For Bank A, this is considered a repo, whereas for Bank B, it is a reverse repo. Repo transactions are utilized by various entities, including banks, mutual funds, hedge funds, and even central banks, as a financial strategy to manage liquidity.