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Implied repo rate

The rate of return that would be earned by purchasing a bond on the spot market and selling the corresponding futures or forward contract (cash and carry trade), with the intention of delivering the bond upon expiry of the futures or forward contract.

(1) The bond with the highest repo rate is the cheapest to deliver. (2) The implied repo rate of a cash and carry trade, compared to the market repo rate, is used to determine whether the trade is worth carrying out or not.

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