Overnight Reverse Repo Usage

What the facility does

The overnight reverse repo facility is the Federal Reserve borrowing money for one day. A counterparty, usually a money market fund, lends cash to the Fed overnight and receives Treasury securities as collateral. The Fed pays interest on that cash at a rate it sets, and the whole transaction reverses the next morning. There is no credit risk in the usual sense, because the collateral is a Treasury security and the borrower is the central bank.

The facility exists to put a floor under short-term interest rates. When there is more cash in the system than there are Treasury bills to absorb it, funds would otherwise lend to each other below the Fed's target range. By offering its own balance sheet as a place to park cash, the Fed sets a rate nobody needs to undercut. Usage therefore measures something specific: how much cash is left over after the market has absorbed everything else.

That is why the number is best read as a residual rather than as a policy stance. A large balance does not mean money is loose in the sense of being lent into the economy; it means the cash has nowhere else to go and is sitting at the central bank instead. A zero balance does not mean money is tight; it means the surplus has been absorbed.

The round trip, in three numbers

The facility was near zero for most of its life. It was created in 2013 as a technical tool and stayed unused in size until 2021, when quantitative easing and Treasury issuance patterns pushed trillions of dollars of cash into money market funds with no bills to buy. Usage rose through 2021 and 2022, peaked at roughly 2.55 trillion dollars in December 2022, and then fell in a nearly straight line as the Fed ran down its balance sheet and bills were issued to fund the deficit.

By late 2026 the balance was a rounding error against that peak, a few billion dollars against a high of 2.55 trillion. Something like 99.8 percent of the surplus has been drained. The facility has effectively done its job and gone quiet, which is precisely the condition in which it stops being interesting and starts being important.

Why a zero balance matters

While the reverse repo balance was large, quantitative tightening could proceed by draining it. The Fed let assets run off, cash moved out of the facility into bills, and bank reserves barely changed. That is a comfortable arrangement: the balance sheet shrinks without putting pressure on the banking system's settlement balances.

Once the facility empties, that buffer is gone. Further runoff has to come out of bank reserves, and reserves are what banks need to settle payments with each other. This is the mechanism behind September 2019, when reserves had been run down, the reverse repo balance was zero, and short-term funding rates spiked for two days before the Fed intervened. The facility balance at that time was nothing; the reserves were the thing that mattered, and they were too thin.

So the useful reading is not the level alone but the combination: a near-zero reverse repo balance alongside a falling reserve level is the configuration that preceded the 2019 squeeze. We publish bank reserves separately for exactly this comparison.

A caveat about the percentile

The percentile shown above needs a warning that most sites will not give you. The series starts in 2003, and for the first decade of its existence the balance was essentially zero, because the facility was not yet in use. That long stretch of zeros drags the whole distribution down and makes the current reading look higher in percentile terms than it is in substance.

We keep the full-history percentile because truncating the sample would be a judgment call we cannot defend with data. But read it with the absolute level in mind: a few billion dollars against a 2.55 trillion peak is not the 25th percentile of anything meaningful. It is zero, with a rounding error.

How we calculate it

We take RRPONTSYD from FRED, which reports overnight reverse repurchase agreements at face value in billions of dollars, one observation per business day. Nothing is smoothed, annualised or seasonally adjusted; the series is already a daily stock.

The peak figure in the summary line is the maximum of the full series, not of a window. The percentile is the share of daily observations since February 2003 that sit below the current value, with the caveat above.

The source is a Federal Reserve release in the public domain, published in the H.4.1 statistical release and distributed through FRED.

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