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In a scenario where Bank A needs cash and has bonds as assets, it can enter into a repurchase (repo) agreement with Bank B, which has excess cash. In this arrangement, Bank A (the dealer) sells its bonds to Bank B, agreeing to repurchase them later, typically the next day. Bank B provides the needed cash and, upon repurchase, Bank A buys back the bonds at a higher price. Thus, Bank A secures the cash it required, while Bank B earns a profit. For Bank A, this transaction is a repo, and for Bank B, it’s a reverse repo. Repo transactions are utilized by various entities, including banks, mutual funds, hedge funds, and even central banks, highlighting their widespread appeal.