The Fed’s Reverse Repo Facility balance fell to just $78.1 billion on August 7, 2025. This shows banks are pulling money out of the Fed, holding onto cash instead of lending or investing. “The Fed’s Reverse Repo Facility (RRP) balance dropped to just $78.1 billion on August 7, 2025.” https://fred.stlouisfed.org/series/RRPONTSYD
Meanwhile, foreign buyers sold $78 billion in U.S. Treasuries since November. Their holdings are now the lowest since March 2020. “Foreign officials sold about $78 billion US Treasuries since November… holdings fell to lowest level since March 2020.” https://cepr.org/voxeu/columns/reverse-conundrum-and-foreign-official-demand-us-treasuries
The Treasury must refinance $9 trillion in debt soon. There is no safety net. Auctions are the only option, and demand looks weak.
When banks reduce funds parked at the Fed, it means they need cash. This shortage likely caused the poor 30-year Treasury auction earlier this year. Dealers had to buy nearly 70 percent of the bonds because few others showed up. “Dealers had to buy nearly 70 percent of the 30-year Treasury auction in June as demand weakened.” https://www.wsj.com/articles/treasury-auction-weak-demand-30-year-bond-11690762218
Less cash from banks also means less liquidity for the stock market. Banks provide much of the cash that keeps markets moving. When they hold back, stocks feel the squeeze too.
This all adds up to a financial system running low on cash. Banks are pulling back. Foreign investors are selling. Huge debt needs refinancing. Bond auctions struggle. This is a clear warning sign.