It may be that financial markets are seeing something approaching the high water mark for the Federal Reserve’s reverse repurchase agreement facility.
The Fed’s so-called reserve repos take in cash from money-market funds and other eligible firms, and over the course of 2021 have seen explosive growth, rising from nearly no demand in the spring to massive inflows. On Monday, financial firms flooded nearly $1.6 trillion into the central bank tool, which compares with a Fed balance sheet standing at $8.6 trillion.
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