37 posts on "Repo"
September 30, 2026
The Role of Repos in Monetary Policy Implementation
In the first two posts of this three-part series, we discussed private market participants that are active in repo markets for profit-making motives. Central banks are also active repo market participants, but their reasons often differ from those of private participants. In today’s post, we discuss how central banks use repos to manage liquidity in the financial system and implement monetary policy.
Posted at 7:00 am in Central Bank, Financial Markets, Monetary Policy, Repo | Permalink | Comments (0)
September 29, 2026
Follow the Cash! Microstructure of Repo Markets
The repo market in the U.S. is a mosaic of segments with distinct participants and various settlement and clearing practices. Why do large cash lenders typically settle their trades through a third-party agent? Why does the interdealer market clear through a central counterparty? Why do levered investors favor bilateral trades? In the second post of this series, we follow the cash as it navigates through repo markets to better understand the costs and benefits that shape the existing market structures.
September 28, 2026
Who’s Borrowing and Lending in Repo Markets?
Repo markets play a vital role in the U.S. financial system. In this three-part series, we examine who participates in these markets, what trade-offs influence how different repo segments are structured, and why repos matter for monetary policy. Today’s post introduces repo transactions, focusing on the major private-sector participants and why they engage in these markets.
April 6, 2026
The Fed Has Two Tools to Influence Money Market Conditions
The Federal Reserve’s 2022-23 tightening cycle involved the use of two monetary policy tools: changes in administrative rates and changes in the size of its balance sheet. This post highlights the results of a recent Staff Report that explores how these tools affect money market conditions. Using confidential trade-level data, we find that both tools have significant effects on the pricing of funds sourced through repo. These results suggest that the Fed can manage how financing conditions are affected even as it influences economic conditions. For example, the Fed can lower its administrative rates to loosen economic conditions, while shrinking its balance sheet to maintain financing conditions in the money markets.
October 8, 2025
The Rise of Sponsored Service for Clearing Repo
Recently instituted rule amendments have initiated a large migration of dealer-to-client Treasury repurchase trades to central clearing. To date, the main avenue used to access central clearing is Sponsored Service, a clearing product that has, until now, received little attention. This post highlights the results from a recent Staff Report which presents a deep dive into Sponsored Service. Here, we summarize the description of the institutional details of this service and its costs and benefits. We then document some basic facts on how market participants use this service, based on confidential data.
August 14, 2024
A New Set of Indicators of Reserve Ampleness
The Federal Reserve (Fed) implements monetary policy in a regime of ample reserves, where short-term interest rates are controlled mainly through the setting of administered rates, and active management of the reserve supply is not required. In yesterday’s post, we proposed a methodology to evaluate the ampleness of reserves in real time based on the slope of the reserve demand curve—the elasticity of the federal (fed) funds rate to reserve shocks. In this post, we propose a suite of complementary indicators of reserve ampleness that, jointly with our elasticity measure, can help policymakers ensure that reserves remain ample as the Fed shrinks its balance sheet.
December 19, 2023
Dropping Like a Stone: ON RRP Take‑up in the Second Half of 2023
Take-up at the Overnight Reverse Repo Facility (ON RRP) has halved over the past six months, declining by more than $1 trillion since June 2023. This steady decrease follows a rapid increase from close to zero in early 2021 to $2.2 trillion in December 2022, and a period of relatively stable balances during the first half of 2023. In this post, we interpret the recent drop in ON RRP take-up through the lens of the channels that we identify in our recent Staff Report as driving its initial increase.
May 8, 2023
Are There Too Many Ways to Clear and Settle Secured Financing Transactions?
The New York Fed’s Treasury Market Practices Group (TMPG) recently released a consultative white paper on clearing and settlement processes for secured financing trades (SFT) involving U.S. Treasury securities. The paper describes the many ways that Treasury SFTs are cleared and settled— information that may not be readily available to all market participants. It also identifies potential risk and resiliency issues, and so promotes discussion about whether current practices have room for improvement. This work is timely given the SEC’s ongoing efforts to improve transparency and lower systemic risk in the Treasury market by increasing the prevalence of central clearing. In this post, we summarize the current state of clearing and settlement for Treasury SFTs and highlight some of the key risks described in the white paper.
April 11, 2022
The Fed’s Balance Sheet Runoff and the ON RRP Facility
A 2017 Liberty Street Economics post described the balance sheet effects of the Federal Open Market Committee’s decision to cease reinvestments of maturing securities—that is, the mechanics of the Federal Reserve’s balance sheet “runoff.” At the time, the overnight reverse repo (ON RRP) facility was fairly small (less than $200 billion for most of July 2017) and was not mentioned in the post for the sake of simplicity. Today, by contrast, take-up at the ON RRP facility is much larger (over $1.5 trillion for most of 2022). In this post, we update the earlier analysis and describe how the presence of the ON RRP facility affects the mechanics of the balance sheet runoff.
Posted at 7:00 am in Central Bank, COVID-19 Facilities, Federal Reserve, Monetary Policy, Repo | Permalink | Comments (3)
January 13, 2022
The Fed’s Latest Tool: A Standing Repo Facility
In July 2021, the Federal Open Market Committee announced a new tool for monetary policy implementation: a domestic standing repurchase agreement facility. In the last post of this series, we explain what this new tool is and how it will support the effective implementation of monetary policy in the floor system through which the Fed implements policy.
RSS Feed
Follow Liberty Street Economics
