Treasury Bill Supply and ON RRP Investment

Gara Afonso, Catherine Huang, Marco Cipriani, Gabriele La Spada and Sergio Olivas

No 20231129, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Take-up at the Federal Reserve’s Overnight Reverse Repo Facility (ON RRP) increased from a few billion dollars in January 2021 to around $2.6 trillion at the end of December 2022. In this post, based on a recent Staff Report, we explain how the supply of U.S. Treasury bills (T-bills) affects the decision of money market mutual funds (MMFs) to invest at the facility. We show that MMFs responded to a reduction in T-bill supply by increasing their take-up at the ON RRP, helping to explain the increased overall take-up.

Keywords: overnight reverse repo (ON RRP); Treasury supply; money market mutual funds (MMF) (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2023-11-29
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