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US TSYS/OVERNIGHT REPO: ON RRP Continues To Fall, But Reserves Still Ample

US TSYS/OVERNIGHT REPO
USGlobalBulletMarketsFixed Income BulletsRegionNorth America

Takeup of the NY Fed's Overnight Reverse Repo facility fell to the lowest level today since May 2021 - by $27B to $144.2B. Since October 29, takeup has fallen by over $100B, with levels well off the all-time high of over $2.5T at end-2022.

  • The move has largely been unexpected, with most observers appearing to believe there would be an uptick starting from the low-$200B levels seen in mid-October. However, that hasn't materialized.
  • It's an interesting time for ON RRP to get drained to this extent, given that the FOMC may be discussing QT policy on Thursday, albeit without any intention of making near-term changes. Overall, reserves + ON RRP (which is considered a fungible substitute for reserves in terms of system liquidity) total $3.4T (per Thursday's Fed weekly balance sheet release plus today's TGA), which is well above levels thought to be scarce (starting somewhere around $3T).
  • The pullback in ON RRP takeup coincided closely with the rise in Tsy bill issuance amd rebuild of the Treasuey General Account after the suspension of the debt limit - but that suspension is set to be lifted at the start of 2025, and ON RRP is expected to bounce back at that time.
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Takeup of the NY Fed's Overnight Reverse Repo facility fell to the lowest level today since May 2021 - by $27B to $144.2B. Since October 29, takeup has fallen by over $100B, with levels well off the all-time high of over $2.5T at end-2022.

  • The move has largely been unexpected, with most observers appearing to believe there would be an uptick starting from the low-$200B levels seen in mid-October. However, that hasn't materialized.
  • It's an interesting time for ON RRP to get drained to this extent, given that the FOMC may be discussing QT policy on Thursday, albeit without any intention of making near-term changes. Overall, reserves + ON RRP (which is considered a fungible substitute for reserves in terms of system liquidity) total $3.4T (per Thursday's Fed weekly balance sheet release plus today's TGA), which is well above levels thought to be scarce (starting somewhere around $3T).
  • The pullback in ON RRP takeup coincided closely with the rise in Tsy bill issuance amd rebuild of the Treasuey General Account after the suspension of the debt limit - but that suspension is set to be lifted at the start of 2025, and ON RRP is expected to bounce back at that time.