What happens when a coupon is paid on bond collateral during the term of a classic repo?
A) Nothing
B) A margin call is triggered on the seller
C) A manufactured payment is made to the seller
D) Equivalent value plus reinvestment income is deducted from the repurchase price

Question

Quizplus · Accepted Answer

When a coupon is paid on bond collateral during a classic repo, a manufactured payment is made to the seller to compensate them for the coupon payment they would have received if they still held the bond.

What Happens When a Coupon Is Paid on Bond Collateral