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In a repurchase agreement (repo), Bank A, in need of quick cash, sells its bonds to Bank B, which has excess cash, with an agreement to buy them back at a later date, typically the next day. This arrangement provides Bank A with the immediate liquidity it requires while allowing Bank B to earn a profit from the sale. When Bank A repurchases the bonds at a higher price, it completes the repo transaction, while for Bank B, this is considered a reverse repo, as it buys securities from Bank A intending to sell them back later for a profit. Repo transactions are utilized by various entities, including banks, mutual funds, hedge funds, and central banks.