Reverse repo
BankingDefinition
The opposite of repo: a money-market fund or bank lends cash overnight to the Fed in exchange for Treasury collateral, earning the reverse repo rate. The Fed uses RRP to set a floor on overnight rates.
RRP usage exploded in 2021-2022 as money funds parked excess cash with the Fed at 4-5%. As QT progressed and rates rose, RRP balances drained to fund Treasury issuance.
RRP usage exploded in 2021-2022 as money funds parked excess cash with the Fed at 4-5%. As QT progressed and rates rose, RRP balances drained to fund Treasury issuance.