When the Backstop Fades, Cracks Appear Everywhere

At first glance, $84.356 billion might not seem alarming. But when that number represents the remaining cushion in a trillion-dollar market plumbing mechanism—the RRP facility—you should sit up. Because something is breaking beneath the surface.

What Are Reverse Repos—Why Should You Care?

The Overnight Reverse Repurchase Agreement (RRP) facility is a tool the Fed uses to absorb excess cash in the financial system. It acts as a release valve when liquidity is abundant and dealers need a safe place to park cash overnight.

From mid-2021 through early 2023, usage surged—peaking near $2.5 trillion. It was the market's way of saying:

"There's more cash than collateral. We don't trust the risk assets. Let us sleep in Treasuries tonight." But now, the cash is gone. This week, the RRP balance has now dropped below $100 billion for 2 out of the last 3 trading days.