Bonds Repurchase

How to conduct bonds repurchase transaction

Please contact your account manager for inquiries.


Bonds Repurchase Transaction

A repurchase agreement is a contract under which the bondholder (client) sells the bond to the buyer (China Galaxy International) for cash proceeds, with a commitment that the bondholder (client) will repurchase the bond (plus interests) at a future date.

 

Cash proceeds through bond repurchase transactions can be used for:

1. Provide leverage in bond investment to enhance investment returns;

2. Invest in other types of bonds for risk diversification;

3. Invest in other products to enrich the asset classes of the portfolio;

4. Withdraw cash to meet client’s financial needs.

 

There is a percentage discount deducted from the market value of a bond that is being offered as collateral in a bond repurchase transaction (The Hair-cut ratio). For example, if a client sells a $100 bond to China Galaxy International and China Galaxy International provides a 30% haircuts for the bond, then the purchase price of the bond through a bond repurchase transaction will be $70.

Factors affecting Haircut ratio:

1. Market liquidity risks of the bonds

2. Credit rating of the bonds

3. Counterparty risk (i.e. client's financial situation and repayment capacity)

4. Other factors related to market risk and credit risk


Disclaimer

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