{"id":13489,"date":"2023-05-25T04:18:43","date_gmt":"2023-05-25T08:18:43","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/overnight-reverse-repo-softening-demand\/"},"modified":"2023-05-25T04:18:44","modified_gmt":"2023-05-25T08:18:44","slug":"overnight-reverse-repo-softening-demand","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=13489","title":{"rendered":"Overnight Reverse Repo: Softening Demand?"},"content":{"rendered":"
\n

<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

By Stone Jiang, FRM<\/em><\/p>\n

Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months.<\/strong><\/p>\n

The Federal Reserve’s Overnight Reverse Repo (ON RRP) facility enables eligible institutions to lend excess money to the Fed while earning a predetermined rate. ON RRP take-up is often considered to be part of the excess liquidity in the financial system. Over a couple of years, we saw rapid growth in the use of the facility, but we think that demand is likely to decline from here.<\/span><\/p>\n

Key Drivers for the Demand Surge<\/h2>\n

ON RRP take-up saw significant growth starting in 2021, rising from nearly zero to over $2 trillion by the end of 2022. A key reason was demand from money market funds (MMFs) – the primary investors in ON RRP – which grew their assets by 1.2 trillion from late 2019 to late 2022. During this period, ON RRP gained favor among MMFs compared to competing assets such as Treasury bills and private repos. As the outstanding amount of Treasury bills decreased by approximately $1.2 trillion in 2021, the available investment options for MMFs narrowed. During the same period, the spread between the Secured Overnight Financing Rate (SOFR), a proxy for the overnight private repo rate, and the ON RRP rate narrowed to around zero, making ON RRP more appealing. As a result, MMFs shifted more than 30% of their allocations from short Treasury securities and private repos to ON RRP, as indicated by Form N-MFP reports.<\/span><\/p>\n

Anticipating a Decline in Demand<\/h2>\n

While MMF assets might still grow due to their higher yields compared to deposit rates, competing assets are likely to gain the upper hand. First, the resolution of the debt ceiling issue would lead to the resumption of bill issuances by the U.S. Treasury. Second, the SOFR\/ON RRP spread, which dipped below 0 in 2022, has started to turn positive in 2023, increasing the allure of private repos. Notably, from December 2022 to May 2023, MMF assets grew by $593 billion, while ON RRP take-up decreased by $60 billion.<\/p>\n

Final Thoughts<\/h2>\n

Despite significant growth in 2021 and 2022, we anticipate a decline in ON RRP take-up in the coming months. Factors such as the potential increase in bills outstanding and the attractiveness of private repos are likely to drive this shift. In our view, the anticipated decline would also offer valuable insights into the ongoing tightening of the financial system.<\/p>\n

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Investment decisions and the appropriateness of this material should be made based on an investor’s individual objectives and circumstances and in consultation with his or her advisors. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. The firm, its employees and advisory accounts may hold positions of any companies discussed. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. This material may include estimates, outlooks, projections and other \u201cforward-looking statements.\u201d Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed.<\/em><\/p>\n

Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.<\/strong><\/em><\/p>\n

This material is being issued on a limited basis through various global subsidiaries and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com\/disclosure-global-communications for the specific entities and jurisdictional limitations and restrictions.<\/em><\/p>\n

The \u201cNeuberger Berman\u201d name and logo are registered service marks of Neuberger Berman Group LLC.<\/em><\/p>\n

\u00a9 2009-2023 Neuberger Berman Group LLC. All rights reserved.<\/em><\/p>\n

Original Post<\/em><\/p>\n

Editor’s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The Federal Reserve’s Overnight Reverse Repo (ON RRP) facility enables eligible institutions to lend excess money to the Fed while earning a predetermined rate. ON RRP take-up is often […]<\/p>\n","protected":false},"author":1,"featured_media":13490,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-13489","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nOvernight Reverse Repo: Softening Demand? | iFintechWorld<\/title>\n<meta name=\"description\" content=\"By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=13489\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Overnight Reverse Repo: Softening Demand? | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=13489\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-05-25T08:18:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-05-25T08:18:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1685002723_image_1368280431.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1536\" \/>\n\t<meta property=\"og:image:height\" content=\"944\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=13489#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=13489\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"Overnight Reverse Repo: Softening Demand?\",\"datePublished\":\"2023-05-25T08:18:43+00:00\",\"dateModified\":\"2023-05-25T08:18:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=13489\"},\"wordCount\":737,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=13489#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=13489\",\"url\":\"https:\/\/ifintechworld.com\/?p=13489\",\"name\":\"Overnight Reverse Repo: Softening Demand? | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-05-25T08:18:43+00:00\",\"dateModified\":\"2023-05-25T08:18:44+00:00\",\"description\":\"By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=13489#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=13489\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=13489#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Overnight Reverse Repo: Softening Demand?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Overnight Reverse Repo: Softening Demand? | iFintechWorld","description":"By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=13489","og_locale":"en_US","og_type":"article","og_title":"Overnight Reverse Repo: Softening Demand? | iFintechWorld","og_description":"By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The","og_url":"https:\/\/ifintechworld.com\/?p=13489","og_site_name":"iFintechWorld","article_published_time":"2023-05-25T08:18:43+00:00","article_modified_time":"2023-05-25T08:18:44+00:00","og_image":[{"width":1536,"height":944,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1685002723_image_1368280431.jpg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=13489#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=13489"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"Overnight Reverse Repo: Softening Demand?","datePublished":"2023-05-25T08:18:43+00:00","dateModified":"2023-05-25T08:18:44+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=13489"},"wordCount":737,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["News"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=13489#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=13489","url":"https:\/\/ifintechworld.com\/?p=13489","name":"Overnight Reverse Repo: Softening Demand? | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-05-25T08:18:43+00:00","dateModified":"2023-05-25T08:18:44+00:00","description":"By Stone Jiang, FRM Despite the significant growth in 2021 and 2022, we anticipate a decline in take-up of the Fed facility in the coming months. The","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=13489#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=13489"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=13489#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"Overnight Reverse Repo: Softening Demand?"}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/13489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13489"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/13489\/revisions"}],"predecessor-version":[{"id":13491,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/13489\/revisions\/13491"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/13490"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}