Reserves Remain Unfazed By TGA Rebuild (2/3)

Bank reserves actually ticked higher over the past month, with a rise in the Treasury General Account more than offset by a drop in reverse repo takeup.

• Indeed, the rebuild of the Treasury's General Account at the Fed ($458B as of Aug 2 in what appears to be a temporary blip down after rising above $500B for the previous 18 days) has gone smoothly so far, with no signs that bank reserves are being unduly drained. The overnight reverse repo facility has fallen by $478B between May 31-Aug 3, almost perfectly offsetting the increase in the TGA over that period.
• Flows from ON RRP into TBills have thus implicitly been the main source of TGA cash. Over the same period, reserves are actually a little higher higher ($12B), and remain above even pre-bank crisis levels.
• Pressure on ON RRP will continue with Treasury upping its end-September cash balance forecast by $50B to $650B, with bill issuance set to continue apace through that time.
• With limited signs of bank deposit outflows evident lately, and money market demand for bills holding up at these rising yields, there is little sign of concern for reserve scarcity developing at this stage (See our previous note on this / and our June Treasury Deep Dive).

Source: Federal Reserve, Treasury, MNI