The Federal Reserve’s Overnight Reverse Repurchase Agreement facility, once the preferred parking lot for trillions in excess cash, processed just $761 million on June 5. Five counterparties showed up. That’s it.
To put that number in context, this same facility absorbed over $2 trillion in late 2021. The decline from $2 trillion to under $1 billion isn’t a gentle slope. It’s a cliff.
What the reverse repo facility actually does
Think of the ON RRP as a giant overnight savings account at the Fed. Non-bank financial institutions, primarily money market funds, can park their cash there overnight and receive Treasury securities as collateral. In return, they earn a risk-free rate.
The facility exists to help the Fed manage short-term interest rates and mop up excess liquidity sloshing around the financial system. When there’s too much cash chasing too few safe assets, the ON RRP absorbs the overflow. When cash finds better places to go, the facility empties out.
