Use of a Federal Reserve facility for storing cash has halved from its peak as money market funds plough their excess funds into US government debt instead.
Investors on Friday put $1.28tn into the Fed’s overnight reverse repo facility (RRP), where cash is stored risk-free for a short period for a generous return. The total was close to the lowest level in two years, half of its $2.6tn peak and a drop of more than 40 per cent since May.
Until this year the record daily inflows of more than $2tn into the RRP were considered a sign of market uncertainty, implying that US money market funds that invest in government debt preferred the safety of the Fed over the volatility of bonds.
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