U.S. Fed's reverse repo volume soars to half a trillion dollars

FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won

NEW YORK (Reuters) – The Federal Reserve’s reverse repurchase window on Wednesday took in $503 billion in cash, hitting a record peak for a third consecutive day, as financial institutions flush with liquidity flocked to the Fed facility to park their cash and secure Treasury collateral.

The U.S. Treasury has targeted a $450 billion cash balance by the end of July, the debt ceiling deadline. To get to that cash level, the Treasury needs to spend its cash, which usually ends up on bank balance sheets, often in the form of money market funds.

With short-term money market yields so low – in some cases negative – investors have trekked to Fed’s reverse repo facility, which pays zero interest rate.

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