Reverse Repo

Leverage Risk

• Reverse repos amplify returns, but they also increase the risk of losses. The use of leverage means that a decline in bond prices could magnify potential losses.
  
  

FX Risk

• While the reverse repo transaction limit is maintained in MYR, it could be denominated in foreign currencies. This creates potential exposure to exchange rate fluctuations, which may impact the return on investment.
  
  

Margin Call/Top-up Risk

• In cases where the value of the collateral falls or the margin requirements change, the investor may be required to inject additional funds to meet the minimum margin level.
  
  

Funding Risk

• The interest rates for reverse repos may fluctuate, potentially increasing the cost of the transaction. This could impact the overall return on investment, especially if rates rise unexpectedly.