Fed's overnight reverse repurchase agreement usage scale was 857 million USD

Summary

On Monday, March 23, the Federal Reserve’s overnight reverse repo (RRP) facility usage was $857 million with 5 counterparties. This is a slight increase from the previous trading day’s $822 million on Friday, March 20.Wallstreetcn For comparison, usage was $582 million on Monday, March 16.

Impact Analysis

So the RRP facility is effectively empty. This isn’t just noise; it’s a major signal that the easy part of Quantitative Tightening is over. The massive cash buffer that absorbed the initial balance sheet runoff is now gone.Wallstreetcn From here on, QT will drain bank reserves directly, which is a much riskier phase. We’re now much closer to a potential funding market squeeze, think September 2019 repo crisis 2.0. The Fed knows this and will have to tread very carefully.

Bottom line—this brings the conversation about ending QT to the front burner, likely sooner than consensus expects. They can’t risk breaking the financial plumbing. I think this increases the odds of a dovish pivot on the balance sheet. A long duration position or a yield curve steepener trade looks increasingly attractive, as the market will have to start pricing in an earlier end to QT.