Fed's overnight reverse repo usage drops to $332 million

Summary

On Monday, March 9, usage of the Federal Reserve’s overnight reverse repurchase agreement (RRP) facility dropped to $332 million with 4 counterparties, down from $1.512 billion on the previous trading day.Wallstreetcn

Impact Analysis

So the Fed’s RRP facility is effectively empty. The drop to just $332 million means the big cushion of excess cash that has been painlessly absorbing Quantitative Tightening (QT) is now gone.Wallstreetcn This isn’t a surprise, we’ve watched it drain for months, but hitting these near-zero levels is a key milestone.

The real story is what happens next. From here on, QT will drain reserves directly from the banking system. This is where the risk of funding market stress—think the September 2019 repo spike—really picks up. This forces the Fed’s hand, putting immense pressure on them to announce a QT taper very soon to avoid breaking the market’s plumbing. Bottom line, this is another clear signal that the end of QT is approaching. This is a dovish tailwind and reinforces the case for being long duration, as the Fed’s next move is to ease, not tighten, its balance sheet policy.