Repo business model
Why repo markets matter
“A well functioning repo market supports liquidity and price discovery in the cash market, thus helping to improve the cost of funding for firms and governments and the efficient allocation of capital.”
BIS, 2017.
“With our wealth of experience in the field, we are well placed to support a financial infrastructure solution for African Sovereign Eurobond debt. A more robust and liquid repo market should lead to more demand from buyers, more refinancing and lower costs of servicing that debt.”
“As a global asset manager, Amundi is proud to support the LSF. This mechanism will foster the emergence and the structuring of the African sovereign debt market, on par with the best international standards. It represents an important milestone for investors, as the African continent offers promising opportunities in terms of sustainable fixed income investment, in particular green bonds.”
Vincent Mortier, CIO, Amundi
Developed countries have long enjoyed the existence of large “repo” markets for their government bonds, facilitating the creation of stable additional funding sources for their public finances.
The LSF objective is to kickstart the same dynamic for African sovereign bonds by providing investors with competitive funding through repurchase agreements (“repo”).
The LSF’s mission is to reduce the cost of borrowing by African Sovereigns, increase the pool of private capital willing to invest in Africa and mobilize affordable resources for green investments.
A repo facility dedicated to African Eurobonds, specifically designed to operate at the highest standards of global markets
Key references
Paper, March 2008
Liquidity and Credit Risk in Emerging Debt Markets (2008)
Review of Finance, April 2010
Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt
BIS, April 2017
Committee on the Global Financial System: Repo market functioning
Journal of African Trade, 7th March 2019
Sovereign bond issues: Do African countries pay more to borrow?
Center For Global Development, 12th July, 2021
The Case for Liquidity Support for Frontier Markets
Wolf Street, 28th July 2021
My Thoughts on the Fed’s Back-to-the-Future “Standing Repo Facilities” Announced Today
Reuters, 28th July 2021
Fed establishes standing repo facilities to support money markets
Pimco, 5th August 2021
Fed’s New Repo Facility Should Ease Future Stress, With Caveats
Brookings, October 2021
The ruinous price for Africa of pernicious ‘perception premiums’ – October 2021
Brian a. Ruane, BNY Mellon
Why repos are Africa’s next frontier
BNY Mellon, 19th May 2022
What Repos Can Do for Africa’s Debt Problem
LSF, December 2022
Repo literature, bibliography and FAQ
About The Liquidity and Sustainability Facility
The LSF was designed by the United Nations Economic Commission for Africa, in collaboration with Afreximbank, with the dual objective of supporting the liquidity of African Sovereigns Eurobonds and incentivizing SDG-related investments such as SDG and green bonds on the African continent.