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It operates the ON RRP (Overnight Reverse Repo Facility), where it borrows cash from money market funds, creating a floor under short-term rates.

Instead, they use Standing Facilities with preset rates. If a bank needs emergency funding, it can approach the Standing Repo Facility and borrow at 5.50%, which is above current market rates.

Repo vs. Reverse Repo: An Overview The repurchase agreement (repo or RP) and the reverse repo agreement (RRP) are two key tools used by many large financial institutions, banks, and some businesses.

One of those tools is the overnight reverse repo facility — or ON RRP among friends. ON RRP allows money market funds and other important short-term funding market players to park money at the Fed.

Because repo is collateralized, it should generally trade at or below the uncollateralized IORB rate. Thus, if many transactions occur at a premium to IORB, there could be a problem.

Invested volumes are impressive and expected to stay that way. The rising trend in Bills over Repo may subside should a debt ceiling saga really kick off. There is more term now than before, and while ...

PHOTO: REUTERS The adjusted RRP rate is meant to help keep funding markets running smoothly by driving short-term rates closer to the offering level on the Fed’s facility. PHOTO: REUTERS KEY rates ...