What Is ON RRP?

What Is the Overnight Reverse Repo (ONRRP)?

The Overnight Reverse Repo facility is a tool operated by the New York Federal Reserve that allows eligible counterparties — primarily money market funds — to park excess cash at the Fed overnight in exchange for Treasury securities as collateral. The facility pays the ONRRP rate (currently in the 4.5-5.0% range) and serves as a floor for short-term interest rates.

From a liquidity perspective, ONRRP acts as a reservoir. When the ONRRP balance is high (it peaked at $2.55 trillion in December 2022), it means a massive amount of cash is parked at the Fed rather than flowing into the private financial system. When ONRRP drains, that cash moves into T-bills, bank deposits, repo markets, and eventually risk assets.

The Great ONRRP Drain of 2023-2024

Between January 2023 and early 2025, the ONRRP balance declined from over $2.2 trillion to roughly $100 billion — a drainage of more than $2 trillion. This was one of the most significant liquidity events of the decade, yet it received relatively little mainstream media attention.

The mechanism was straightforward: the Treasury issued large quantities of T-bills with yields above the ONRRP rate, incentivizing money market funds to move cash from the ONRRP facility into T-bills. This effectively transferred liquidity from the Fed back into the private sector.

During this period, the S&P 500 rallied approximately 35% and BTC went from $16,500 to over $70,000. While many factors contributed, the ONRRP drain was a primary liquidity tailwind that our model correctly identified as Risk-On.

How to Interpret ONRRP on DollarLiquidity.com

ONRRP uses a "higher_worse" direction — a rising balance absorbs liquidity, while a falling balance releases it. Key signals to watch: (1) weekly change magnitude — drops of $50B+ per week signal active drainage. (2) level relative to the $200B floor — below this level, ONRRP is nearly depleted as a liquidity source. (3) rate comparison — if T-bill yields are above the ONRRP rate, drainage should continue; if below, money may flow back into ONRRP.

Now that ONRRP has been largely drained (near $100-200B), its incremental contribution to liquidity easing is limited. This shifts the focus to TGA and the Fed balance sheet as the primary liquidity levers going forward. Track all three together with TGA Balance, Fed BS Size, Net Liquidity.

Common Mistakes and Better Workflow

Mistake: Expecting ONRRP drainage to continue indefinitely. The facility is near its floor — there is limited juice left to squeeze. Investors who bet on continued liquidity from ONRRP drainage may be disappointed.

Better approach: Shift focus to new liquidity catalysts when ONRRP is depleted. Currently, Fed balance sheet decisions and TGA fiscal flows are more impactful. Use our scoring engine — it automatically reweights the contribution of each indicator based on its z-score magnitude.