What is the Fed's reverse repo (RRP) facility?
5 min read · Updated June 2026
The overnight reverse repo facility — RRP for short — is one of the less famous corners of monetary plumbing, but it tells a vivid story about the post-2020 era of excess liquidity.
What a reverse repo actually is
In a reverse repo, an eligible institution — typically a money market fund — lends cash to the Federal Reserve overnight and receives Treasury collateral in return, earning a set interest rate. The next day the trade unwinds. It's effectively a very safe, very short-term place to park cash that pays the Fed's administered rate.
The facility sets a floor under short-term interest rates: no money market lender has much reason to accept less than they could earn risk-free at the Fed overnight.
Why it exploded after 2020
Pandemic-era policy — near-zero rates, large-scale asset purchases, and fiscal stimulus — flooded the financial system with cash. Money market funds had more cash than they could profitably deploy in private markets at attractive, safe rates.
So they parked it at the Fed. Usage of the RRP facility climbed from near zero to a peak of roughly $2.5 trillion in 2022–2023 — an unprecedented scale. As the Fed later raised rates and drained reserves through quantitative tightening, that balance fell back down, a direct readout of liquidity leaving the system.
Why it's worth watching
- A liquidity gauge. A high RRP balance signals abundant excess cash; a falling one signals that cushion shrinking.
- A rates floor. It anchors the very front of the money-market curve.
- A QT thermometer. Watching it drain helped markets judge how far the Fed's balance-sheet runoff could go before reserves got scarce.
See it next to the curve
The YieldCurve AI timeline plots RRP usage right alongside the yield curve, so you can watch the 2021–2023 spike and unwind in the context of the Fed's hiking cycle — two views of the same monetary story.
Common questions
Who can use the Fed's reverse repo facility?
Eligible counterparties, most notably money market funds, plus banks and government-sponsored enterprises. Ordinary investors access it indirectly by holding money market funds.
Why did RRP usage get so large?
Post-2020 stimulus and asset purchases left money market funds with more cash than they could safely deploy elsewhere, so they parked record amounts — about $2.5 trillion at the peak — at the Fed overnight.
What does a falling RRP balance mean?
It generally signals excess liquidity leaving the system, often as the Fed raises rates and shrinks its balance sheet, making other short-term options relatively more attractive.
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Educational content only — nothing here is investment advice. For data sources and methodology, see the about page.