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It's been fairly quiet on the overnight reverse repo front in the past few weeks since quarter-end. The overall level of takeup sits just shy of $900B as of Jul 22, well below the peak of just under $1T on Jun 30. And it's likewise been fairly uneventful in the overnight rates arena since the Federal Reserve upped the IOER and ON RRP rates by 5bp at the June FOMC meeting, with effective Fed funds printing 10bp every day since (apart from 8bp at quarter end - again on Jun 30).


Source: Federal Reserve, MNI

  • As the FOMC goes into its July meeting (Jul 27-28), its leadership is likely to be pleased not to have to contend with major questions over funding market functioning. The growing pile of reserves is the biggest medium-term question: with the TGA is falling as expected, and continued Fed purchases, bank reserves are set to push above $4trn by early August for the first time in two months.
  • Wrightson ICAP expects banks to be "willing to carry a somewhat larger amount of reserves for IOER-arbitrage reasons in the weeks ahead", but if that doesn't materialize, then we could see more expansionary pressure on ON RRP takeup.


Liabilities Reserves US Treasury General Account Reverse Repo (Foreign) Reverse Repo (Dealers) Currency In Circulation Other*
Last Week's Net Change (USDbn) 29.8 -26.8 -0.3 72.6 -2.2 -2.2
4-Week Net Change (USD bn) 208.8 -56.6 8.4 26.2 6.9 -101.4
Total Holdings (USD bn) 3974.5 678.1 250.7 886.2 2185.3 315.0