Reuters: Fed reverse repo volume sparks worries U.S. short-term rates could go below zero

Financial institutions flush with cash have flocked to the Federal Reserve’s reverse repurchase (RRP) facility, loaning the U.S. central bank money at 0% interest and raising concerns in the bond market that key short-term interest rates could actually fall below zero.

“The fact that balances in these programs are swelling is an indication that money funds, non-U.S. official institutions, and the government state enterprises are struggling to find assets with returns above 0%,” said Joseph Abate, managing director, fixed income research at Barclays in a research note.

Gennadiy Goldberg, senior rates strategist, at TD Securities said so far the facility is working as intended, “as a relief valve for excess cash.” Without the reverse repo activity, “money market rates such as SOFR (U.S. secured overnight financing rate) would be pressured lower possibly below zero,” he added.

The full article is available at

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