Reverse Repurchases are a clear indication of excess liquidity in the Banking / Financial System.
Money Center Banks have monies in excess after meeting obligations to the following:
Liabilities
Investments
Lending
An increase in the Reverse Repurchase activity will decrease the money supply. Reverse Repurchases mean that commercial banks are provided more incentives to park their funds with the Central Bank - decreasing the supply of money in the market.
RRA's soak up excess Liquidity.
As we can see they have broken Trends should be expected as CASH is within Overnight Reverse Repo Facilities @ 500Billion assist in providing support for overnight interest rates by acting as an alternative investment for a broad base of money market investors when rates fall below the interest on reserve balances.
This is facility is not for public consumption, but Primary Broker / Dealers and Money Center Banks and Financial Institutions.
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