Overnight Reverse Repurchase Agreement Facility (ON RRP)

A Federal Reserve tool where eligible counterparties lend cash overnight to the Fed in exchange for Treasury securities as collateral, helping to set a floor on short-term rates.

What is Overnight Reverse Repurchase Agreement Facility (ON RRP)?

Established in 2013 and expanded in 2021 to include 108 counterparties like money market funds and GSEs, the ON RRP rate is set at 4.55% as of October 2025. Daily usage peaked at $2.55 trillion in December 2022 but fell to $450 billion by September 2025 as reserves tightened. Transactions are capped at $160 billion per counterparty, with the Fed selling securities and repurchasing them the next day.

It absorbs excess liquidity, preventing rates from falling below the target; during 2021 abundance, it drained over $1 trillion daily from money funds yielding below market rates. In the ample reserves framework, ON RRP complements IORB (4.90%) for non-banks, stabilizing the federal funds rate within 4.75-5.00%.

Usage in 2025 averaged $600 billion, down from 2023 highs, reflecting QT progress and higher opportunity costs in alternatives like T-bills yielding 4.7%.