Usage of the Fed’s overnight reverse repo facility (RRP) has dropped to its lowest level in a year, as US money market funds instead add to their holdings of government debt.
Investors last Thursday stashed $1.93 trillion in the Fed’s overnight reverse repo facility (RRP), where cash is stored risk-free for a generous return, the lowest amount in a year. Although it rose slightly on Friday, likely due to month-end flows, the total is down by more than $200 billion over the past month.
While RRP levels have finally begun to fall, analysts say they expected that to happen more quickly than it has given a burst of short-term debt issuance by the US government, which is replenishing coffers that were depleted during the debt ceiling fight. The reluctance of money market funds to plough headfirst back into Treasury bills betrays a lingering unease about the direction of US interest rates as inflation remains stubbornly high.