Overnight Reverse Repo falls ~48% in one day?!? pic.twitter.com/ceRcSFQVm0
— Loren Boston THE FIAT WORLD IS WORRIED (@LorenBoston) February 4, 2025
Falling 49% in one day is unprecedented. It means sources of market liquidity are drying up quickly. When RRP falls to zero, and as the Fed continues to decrease its balance sheet (sell USTs), it will put upward pressure on yields.
— Loren Boston THE FIAT WORLD IS WORRIED (@LorenBoston) February 4, 2025
This suggests that banks, money market funds, or financial institutions that were previously lending cash to the Fed in exchange for Treasuries are now pulling that money out, possibly to deploy it elsewhere (like lending, investing, or covering liquidity needs). Such a sharp drop can signal a major shift in market conditions, liquidity demand, or Fed policy changes.