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Treasury Bill Supply and ON RRP Investment

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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.

Suggested Citation

  • Gara Afonso & Catherine Huang & Marco Cipriani & Gabriele La Spada & Sergio Olivas, 2023. "Treasury Bill Supply and ON RRP Investment," Liberty Street Economics 20231129, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:97392
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    File URL: https://libertystreeteconomics.newyorkfed.org/2023/11/treasury-bill-supply-and-on-rrp-investment/
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    More about this item

    Keywords

    overnight reverse repo (ON RRP); Treasury supply; money market mutual funds (MMF);
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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