Reverse Repo Facility Hits Record Low, Signaling Financial Strain

The Federal Reserve’s reverse repo facility has hit a new record low, sparking concerns about potential financial strain. Only 14 participants participated in the overnight repurchase agreement window on Thursday, leaving a meager $28.8 billion in reserves. This marks the smallest balance since April 2021 and is attributed to aggressive Treasury Department efforts to rebuild its own cash reserve by selling short-term T-bills. This withdrawal of liquidity from the RRP facility has led investors to shift their attention towards government IOUs, causing a decrease in demand for the facility.