Suppose party A wishes to buy a security such as a bond using borrowed money. It approaches party B with a request to "repo" the bond. If the repo is agreed to, party B lends party A an amount of money close to the value of the bond. Party A buys the bond on the market and transfers it to the custody of party B for safekeeping. The two parties (A and B) also agree that on a specified future date party A will repay the amount of money lent by party B, plus interest, and party B will return the bond to A. The bond is thus serving as collateral for the loan from B to A. The interest rate that A pays B is called the "repo rate."

Donald MacKenzie, An Engine, Not a Camera, loc. 1290