The Overnight Reverse Repo Market as A Liquidity Measure
I like to use Overnight Reverse Repo (ONRR) activity as a measure of liquidity in the system. The Fed’s ONRR rate was 5.30% as of August 5th. One can see how ONRR activity was over $2 Trillion approximately 1 year ago. The ONRR level was bouncing between $400-500 billion over the past few weeks and sits at $316 billion today. That tells me that institutions (banks and non-banks) have less liquidity today to park with the Fed as compared to a year ago or even several months ago.
