Washington, D.C., U.S. – Banks drew a record $50.35 billion from the Federal Reserve’s Standing Repo Facility (SRF) on Friday, as month-end pressures drove heightened demand for liquidity. At the same time, financial institutions parked $51.8 billion in the Fed’s reverse repo facility, highlighting unusual cash movements in U.S. money markets.

The Standing Repo Facility, introduced in 2021, provides fast, collateralized loans to eligible financial institutions using Treasury or mortgage-backed securities. Analysts said Friday’s spike in usage reflected the typical end-of-month volatility, when firms adjust cash positions and temporarily reduce lending activity.

“Ironically, the number of securities given to the Fed about equals the amount of cash received,” said Scott Skyrm of money market trading firm Curvature Securities. “This was the first time the SRF functioned as designed.”

Analysts at Wrightson ICAP expect funding pressures to ease next week, noting that SRF and reverse repo activity historically subsides quickly after calendar-end liquidity movements.

Fed Signals End of Quantitative Tightening

The record SRF usage coincided with Federal Reserve announcements regarding quantitative tightening (QT). The central bank said it will end balance sheet runoff on December 1, halting the drawdown of Treasury and mortgage-backed securities accumulated during pandemic stimulus.

“Our long-stated plan has been to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” said Fed Chair Jerome Powell. “Signs have clearly emerged that we have reached that standard in money markets.”

Since peaking at $9 trillion in 2022, the Fed’s balance sheet has shrunk to $6.6 trillion, with the goal of normalizing liquidity and stabilizing the federal funds rate.

Fed Officials Express Concerns About SRF Utilization

Despite the record usage, some Fed officials voiced concerns about the SRF’s underutilization in recent months. Dallas Fed President Lorie Logan said the facility had “gone largely untapped at times when it should have been an attractive source of funds,” and urged dealers to be more ready to access it as short-term rates fluctuate.

Similarly, Cleveland Fed Chief Beth Hammack highlighted that underuse of the SRF limits its effectiveness as a tool to redistribute reserves across the banking system.

“It is disappointing when we put tools out there that banks say they want and don’t really get used,” Hammack said, emphasizing the importance of SRF adoption for overall market stability.

The Fed’s Standing Repo Facility and reverse repo operations remain critical instruments for managing short-term liquidity, especially during periods of heightened market volatility and month-end funding pressures.