Reuters, New York, July 30-The US Federal Reserve’s (Federal Reserve/FED) overnight reverse repurchase operation on Friday attracted more than $1 trillion in cash for the first time. Investors and financial institutions continued to invest in this tool.
As the United States is about to hit the debt ceiling, the Treasury Department cuts the issuance of Treasury bills, and financial institutions have difficulty finding places to invest in excess cash. Demand for the Fed’s reverse repurchase tools has surged.
The financial system currently has a cash stock of approximately US$4 trillion. The Federal Reserve’s asset purchase plan, the decline in the issuance of Treasury bills, and the government’s rapid reduction of cash in the Federal Reserve are some of the reasons for the continuous increase in the cash stock in the financial system. Since last fall, the Treasury’s cash balance in the Federal Reserve General Account (TGA) has fallen by more than $1 trillion.
The Federal Reserve said that on Friday, financial institutions’ demand for overnight reverse repurchase tools reached $1.04 trillion. A total of 86 companies participated in the bidding, including money market funds and other qualified financial institutions.
The Treasury Department had to reduce the cash balance in its general account before the U.S. debt ceiling came into effect again on July 31. This will result in more cash inflows into the already sufficiently liquid financial system.
The Treasury Department stated in May that its goal is to reduce the TGA cash balance to $450 billion on July 31. According to data as of Wednesday, the current balance is $537 billion.
Analysts said that as cash balances remain high, the demand for the Fed’s reverse repurchase tools may continue to rise. Scott Skyrm, executive vice president of fixed income and repurchase at Curvature Securities, estimates that by the end of this year, the amount of cash attracted by the operation may exceed $2 trillion. (Finish)
Compile Gao Sijia; Review the red color
.