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US TSYS/OVERNIGHT REPO: First Sub-$100bn RRP Since Apr 2021

US TSYS/OVERNIGHT REPO
USBulletMarketsFixed Income BulletsNorth America

Takeup of the Fed’s RRP facility extended its decline to a fresh recent low today, at $98bn falling below $100bn for the first time since Apr 2021. The number of counterparties increased by 1 to 40. 

  • It follows the Fed's decision on Wednesday to lower the ON RRP offer rate by 30bp to 4.25%, vs the 25bp drop in the Fed funds rate (ie a 5bp relative adjustment). The implementation note said, "Setting this rate at the bottom of the target range for the federal funds rate is intended to support effective monetary policy implementation and the smooth functioning of short term funding markets."
  • It wasn't clear how much it would impact the actual takeup of the ON RRP facility, although a couple 33bn decline in two days is reasonable, nor did the FOMC mention that as an objective of the tweak.
  • If repeated in future days, the pullback bears watching. Funds moving from ON RRP to broader reserves could help delay the eventual end of QT, which some analysts see being announced as soon as the January meeting.
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Takeup of the Fed’s RRP facility extended its decline to a fresh recent low today, at $98bn falling below $100bn for the first time since Apr 2021. The number of counterparties increased by 1 to 40. 

  • It follows the Fed's decision on Wednesday to lower the ON RRP offer rate by 30bp to 4.25%, vs the 25bp drop in the Fed funds rate (ie a 5bp relative adjustment). The implementation note said, "Setting this rate at the bottom of the target range for the federal funds rate is intended to support effective monetary policy implementation and the smooth functioning of short term funding markets."
  • It wasn't clear how much it would impact the actual takeup of the ON RRP facility, although a couple 33bn decline in two days is reasonable, nor did the FOMC mention that as an objective of the tweak.
  • If repeated in future days, the pullback bears watching. Funds moving from ON RRP to broader reserves could help delay the eventual end of QT, which some analysts see being announced as soon as the January meeting.
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