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Half a trillion dollars is sitting at the Fed earning nothing
By Benjamin Purvis and Alex Harris
Bloomberg News
Thursday, May 27, 2021
There's so much spare cash sloshing around U.S. funding markets that investors are choosing to park almost half a trillion dollars at the central bank -- earning absolutely nothing.
Use of the Federal Reserve's reverse repo facility -- a mechanism that’s part of the central bank's arsenal for helping to steer short-term interest rates -- surged today to an unprecedented $485.3 billion. And with the forces driving the dollar glut still some way from abating, that figure could climb further, adding fuel to an increasingly complex debate about what the Fed should do with its various tools to keep a rein on policy.
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The RRP facility, as it's commonly called, is "the only safety valve" for the pressure that has been building up in money markets, according to Gennadiy Goldberg, a senior rates strategist at TD Securities in New York. "It's really just holding back the flood of cash coming." ...
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