The Federal Reserve accepted $1.853 billion from seven counterparties in its latest overnight reverse repurchase operation, continuing a pattern of historically low usage for a facility that once served as the financial system’s biggest parking lot for excess cash.

To put that number in perspective: at its peak during 2022-2023, the ON RRP facility regularly absorbed more than $2 trillion per day. The current figure represents a decline of more than 99% from those highs.

What the reverse repo facility actually does

The Federal Reserve’s overnight reverse repurchase facility allows money market funds, government-sponsored enterprises, and other eligible financial institutions to park their excess cash with the Fed overnight. In return, they receive Treasury securities as collateral, earning a fixed rate of interest.

The award rate for this operation was 3.50%, consistent with the prevailing federal funds target range.

The facility exists to put a floor under short-term interest rates. When there’s too much cash sloshing around the financial system, money market rates can drift below the Fed’s target. The ON RRP gives institutions somewhere productive to stash that cash, which drains excess reserves from the system and keeps rates where the Fed wants them.

During 2021-2023, the combination of pandemic-era stimulus, quantitative easing, and a flood of government deposits created a tidal wave of excess liquidity. The ON RRP facility became the primary relief valve, with usage regularly exceeding $2 trillion.

The long decline to single-digit billions

Throughout 2026, daily ON RRP totals have frequently dipped below $25 billion. On many days, the figure has rested in the low single-digit billions. The $1.853 billion accepted from just seven counterparties is squarely in line with that trend.

The shrinkage reflects several converging forces. The Fed’s quantitative tightening campaign, which involves letting bonds roll off its balance sheet without reinvestment, has been steadily reducing the amount of reserves in the banking system. As reserves become less abundant, institutions have less excess cash to park at the Fed.

What this means for investors

The transition carries risks worth watching. The Fed has been operating under an “ample reserves” framework, meaning it wants to keep enough reserves in the banking system that short-term rates stay stable without constant intervention. As the ON RRP approaches zero and quantitative tightening continues, there’s a narrowing margin for error. If reserves become too scarce, money market rates could spike unexpectedly, similar to the September 2019 repo market disruption that forced the Fed into emergency interventions.

The seven counterparties in this latest operation are unnamed, as is standard practice. At the facility’s peak, dozens of institutions were participating daily. Seven suggests that most eligible participants simply don’t need the facility right now.

Investors tracking macro liquidity conditions should monitor whether ON RRP usage stabilizes near current levels or continues declining toward zero. A sustained period at or near zero would signal that the Fed’s liquidity buffer is fully exhausted, making the system more sensitive to unexpected shocks.