Discussion Paper

Insights from MMF Portfolio Allocations amid Balance Sheet Normalization

Abstract: In June of 2022, the Federal Reserve (Fed) began to reduce its securities holdings and decrease the size of its balance sheet, a process known as balance sheet runoff. The decline in the Fed's assets mechanically results in a decline in Fed liabilities, and on net since June 2022, most of the decline in securities holdings has been associated with a decline in use of the Fed's overnight reverse repurchase (ON RRP) facility, a facility in which eligible counterparties are able to enter into an overnight reverse repo agreement with the Fed, earning the ON RRP rate on funds held at the facility.

https://doi.org/10.17016/2380-7172.3709

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: FEDS Notes

Publication Date: 2025-03-03

Number: 2025-03-03-2