Gilt repos meaning

A gilt repo is a securities financing transaction in which UK government bonds (gilts) are sold for cash with a simultaneous agreement to repurchase the same gilts at a set date and price. In legal terms it operates as an outright transfer of title with a forward repurchase, used to obtain secured funding or place surplus cash. The expression is a market term rather than a statutory definition; gilt repos are typically documented under the ICMA Global Master Repurchase Agreement (GMRA). Key legal features include: transfer of legal title to the buyer, haircuts and margining, substitution rights, manufactured payments on coupon dates, events of default, and close-out netting on insolvency. In the UK (England & Wales, Scotland and Northern Ireland) and in Ireland, GMRA-based repos may benefit from protections for title-transfer collateral and close-out under financial collateral regulations. Gilt repos are widely used for liquidity management, market-making and short-covering, and by the Bank of England in monetary operations. Settlement commonly occurs in CREST. In Ireland, similar transactions are entered into over Irish government bonds; the label “gilt repo” is generally reserved for UK gilts.