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More Room To Run For ON Reverse Repo Takeup


Reserves ticked up slightly in the week to May 26 (+$27.6B), but remain below where they were four weeks ago (-$37.4B), despite a continued drawdown in the TGA (-$53.6B last week, -$155.2B over the past 4 weeks).

  • The "discrepancy" is of course wholly due to the huge rise in overnight reverse repo takeup, which increased by $148B over the week, and has risen $287B in a month (to a total $670B - including both domestic and foreign counterparties). Takeup for domestic ON RRP was $485B on Thursday.
  • We'll continue to see a drawdown in the TGA over the coming weeks, but by not quite as much as had been anticipated prior to the quarterly refunding document (and therefore not quite as many reserves entering the system near-term as had been anticipated by some).

  • TD sees the RRP facility "easily" reaching $600-700B in the coming months - with the peak probably occurring just before the debt ceiling legislation needs to be passed (Jul 31).
  • Theoretically, the only limit to the ON RRP takeup is the amount of Treasuries held by the Fed - and at nearly $5.1trn, there is plenty of room to keep expanding takeup if necessary.

LiabilitiesReservesUS Treasury General AccountReverse RepoCurrency In CirculationOther
Last Week's Net Change (USDbn)27.6-53.6148.31.5-143.1
4-Week Net Change (USD bn)-37.4-155.2287.59.018.6
Total Holdings (USD bn)3851.6812.5670.42170.2398.9

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