WASHINGTON— Use of the Federal Reserve’s standing overnight liquidity backstop jumped on Monday, underscoring persistent funding-market pressures as year-end approaches.
Eligible financial firms borrowed $25.95 billion from the Fed’s standing repo facility, according to New York Fed data—one of the highest daily totals since the tool was launched in 2021 to provide rapid, collateralized liquidity against Treasury and mortgage-backed securities, Reuters reported.
The overnight loans were priced at 3.75%, the top of the Fed’s current 3.50%–3.75% target range for its policy rate. Repo facility usage often rises around quarter-ends, when money markets tend to become more volatile. The last higher reading came on Dec. 1, while usage hit a record $50.35 billion on Oct. 31, Reuters said.
The standing repo facility is intended to act as a shock absorber when private market rates exceed those offered by the central bank, supporting monetary-policy implementation and smooth market functioning. Earlier this month, the Fed halted balance-sheet runoff and began buying short-dated Treasury securities to help stabilize liquidity conditions, Reuters reported.
The central bank also recently removed the facility’s $500 billion daily cap to encourage broader use “when economically sensible,” Fed Chair Jerome Powell said, according to Reuters. At the same time, use of the Fed’s reverse repo facility fell to $10.55 billion on Monday from $20.34 billion on Friday, New York Fed data showed.