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In a repurchase agreement (repo), Bank A, needing cash, sells bonds to Bank B, which has excess cash. Bank A agrees to buy back the bonds at a higher price later, typically the next day. This transaction allows Bank A to obtain necessary cash while Bank B earns a profit from the resale. From Bank A's perspective, it is a repo, while from Bank B's viewpoint, it is a reverse repo, as they purchase securities intending to sell them back at a profit. Repo agreements are utilized by various entities, including banks, mutual funds, hedge funds, and even central banks, to manage liquidity and generate income.