Fed's overnight reverse repo usage scale rises to $441 million

Summary

On Tuesday, February 17th, the usage of the U.S. Federal Reserve’s overnight reverse repo (RRP) facility was $441 million, an increase from the previous day’s $377 million.Zhitong The number of counterparties was five. This level represents a significant decline from the $1.447 billion usage reported a week earlier on February 10th.

Impact Analysis

Don’t get distracted by the minor daily uptick—the real story is that the Fed’s reverse repo facility is effectively empty. This $441 million figure is just noise; the signal is that the multi-trillion dollar cash buffer is gone.Zhitong This was the primary sponge for the Fed’s Quantitative Tightening (QT), absorbing liquidity so bank reserves wouldn’t have to. Now that sponge is dry.

From this point forward, QT will drain reserves directly from the banking system, significantly raising the odds of money market volatility and stress. This is the endgame for QT. The Fed will be forced to announce a tapering of its balance sheet runoff very soon to avoid a repeat of the 2019 repo spike. This is a structurally dovish development and reinforces the case for being long duration, as a key source of upward pressure on yields is nearing its end.