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Reverse Repo (ON RRP): The Fed’s Hard Floor

Macro Glossary, Macro Drivers

By Ken Chigbo, macro trader and founder of KenMacro, 18+ years in markets.

Updated 2026-05-20

The desk’s answer

The ON RRP is the Fed’s Overnight Reverse Repurchase Facility, where money market funds, GSEs, primary dealers and other eligible non-bank counterparties lend cash to the Fed overnight in exchange for Treasury collateral at the published ON RRP rate. It is the lower administered rate in the FOMC’s target range and the hard floor for short-term dollar rates: no rational money market fund would lend below ON RRP in the private market when it could earn ON RRP at the Fed. The ON RRP outstanding balance is the cleanest gauge of excess dollar liquidity, peaking above 2.5 trillion dollars in late 2022 and draining steadily through 2023 to 2024.

Defined term, ON RRP (Overnight Reverse Repurchase Facility)

The ON RRP is the Federal Reserve’s Overnight Reverse Repurchase Facility, in which eligible counterparties (primary dealers, money market funds, GSEs, and other approved institutions) lend cash to the Fed overnight against Treasury collateral at the published ON RRP rate. It is the hard floor of the FOMC’s target range, the lower administered rate, and a direct measure of excess dollar liquidity in the system.

Why ON RRP exists

When the Fed pays interest to banks on reserves (IORB) but money market funds cannot earn it, money funds need their own place to park excess cash at the Fed’s chosen rate. The ON RRP fills that role: any eligible counterparty can lend cash to the Fed overnight at the ON RRP rate, taking Treasury collateral in return. It puts a hard floor under short-term rates because money funds would rather earn ON RRP than lend below it in repo or in fed funds. The facility was introduced in 2013 and became central to the toolkit when post-pandemic liquidity made excess reserves enormous.

Reading the ON RRP balance

The total dollar amount parked at ON RRP overnight is published daily by the New York Fed. It surged from near zero in mid-2021 to a peak above 2.5 trillion dollars in late 2022, then drained steadily to below 100 billion by mid-2024 as Treasury bill issuance soaked up the excess. The balance is a direct measure of excess dollar liquidity in the system: high ON RRP means more cash than the private market wants to absorb at competitive rates, low ON RRP means the system is finding private homes for the cash. Watching it run to zero is a leading indicator of repo-rate pressure and the end of the abundant-reserves regime.

How macro traders use the data

Three signals. First, the level: an ON RRP balance running to zero means the next stress will pass through to repo and SOFR rather than being absorbed by the facility. Second, the trend: a fast drain of ON RRP without a corresponding rise in bank reserves means reserves are tightening, which is a stealth QT effect. Third, quarter-end and year-end balances: money funds park more at ON RRP at period-end as bank balance sheets contract, which is mechanical and not signal. The desk watches ON RRP alongside reserves, the TGA balance and bill issuance to read the live liquidity backdrop.

Frequently asked

What is the ON RRP?

The Overnight Reverse Repurchase Facility, where eligible non-bank counterparties (money market funds, GSEs, primary dealers) lend cash to the Federal Reserve overnight at the published ON RRP rate against Treasury collateral. It is the hard floor for short-term dollar rates.

Why does ON RRP matter for liquidity?

Because the total balance parked at ON RRP is a direct measure of excess dollar liquidity in the system. High balances mean abundant excess cash, draining balances mean the system is absorbing cash through private markets, and a zero balance means the next stress hits repo and SOFR directly.

Where can I see the ON RRP balance?

The New York Fed publishes daily ON RRP operation results on its website. Bloomberg ticker is RRPONTSY, and FRED publishes the series as RRPONTSYD with a one-day lag. It is the standard daily liquidity gauge for macro desks.

What this means at the desk

Watch the ON RRP balance drain. When it hits zero, the Fed has lost its liquidity shock absorber and the next move passes straight into repo.

Educational glossary entry only,

From the desk

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