34 counterparties take USD 181.417 billion at the Fed reverse repo operation.

34 counterparties take USD 181.417 billion at the Fed reverse repo operation.

On June 13, 2025, the Federal Reserve (Fed) conducted a reverse repo operation where 34 counterparties took USD 181.417 billion. This operation is part of the Fed's ongoing efforts to enhance liquidity and manage repo market stress [1].

The reverse repo operation allows counterparties to borrow cash overnight by pledging high-quality collateral, such as U.S. Treasuries. The Fed's Standing Repo Facility (SRF) has been upgraded to include a morning window, starting on June 26, 2025, to provide liquidity early in the day when market stress often occurs [1].

The Fed's move to expand the SRF is aimed at normalizing its use as a routine liquidity backstop rather than a last-resort facility. This shift is particularly significant as quantitative tightening (QT) drains reserves and Treasury issuance soaks up cash, potentially creating liquidity holes [1].

The latest Senior Financial Officers (SFO) survey indicates that financial institutions prefer using the SRF over the discount window, especially during periods of elevated money market rates. This preference reflects the SRF's more predictable terms and reduced stigma compared to the discount window [2].

The recent USD 2 billion repurchase agreement (repo) launched by Argentina with seven private banks further underscores the importance of repo operations in managing foreign reserves and liquidity. The agreement features a floating interest rate of 450 basis points over the Federal Reserve's Secured Overnight Financing Rate (SOFR) [3].

The Fed's reverse repo operations and the SRF's expansion signal a proactive approach to managing liquidity and preventing market stress. However, there are concerns that over-reliance on the Fed as the primary repo provider could hollow out private repo markets, create moral hazard, and distort market signals [1].

References:
[1] https://www.linkedin.com/pulse/how-fed-nationalizes-liquidity-from-backstop-bedrock-when-pecoraro-ypdne
[2] https://www.risk.net/risk-quantum/7961630/repo-facility-preferred-over-discount-window-sfos-say
[3] https://www.bloomberg.com/news/articles/2025-06-11/bank-of-china-jpmorgan-among-banks-in-argentina-2-billion-repo