Definition
A Fed facility where institutions park excess cash overnight. DLI treats ON RRP as a conditional liquidity-buffer transition signal: recent large depletion can tighten the score, while an already depleted and stable balance is dormant.
Money market funds are the primary users of ON RRP. The facility peaked above $2T after COVID-era liquidity injections and later drained sharply. The DLI does not linearly subtract every dollar of RRP from liquidity; instead it scores recent 3m/6m/12m depletion when the balance has moved toward the low end of its rolling 5-year range. If ON RRP has already been near zero for a year with little change, it contributes no active tightness signal. The ON RRP rate (set by the Fed) acts as a floor for short-term rates.