Who are the RRP Participants and how much are they taking each day? As of 11/30 (this is all backward-looking): Fidelity’s funds combined had $288 billion in RRPs (19% of total RRPs), Vanguard in second with $165 billion (11% of total RRPs)
Good morning r/Superstonk, I hope everyone's day is off to a great start! I know we all saw the RRP number from last Friday hit almost $2 trillion! The spike at the end of the quarter is expected:
On the last business day of each quarter, banks (UPDATE banks are doing the opposite as called out by u/OldmanRepo in the comments--apologies for any confusion) Primary Dealers, Money market funds, and Government Sponsored pile into RRPs to drop cash from their balance sheets in favor of said Treasury securities for Regulatory reasons.
However, why do these counterparties need to do this, to begin with? Simple, they are cracking under the pressure that comes from all the money this man continues to print:
However, this constant buying caused short-term Treasury yields to turn negative--ruh roh!
That’s when the JPOW and the Fed offered to take this cash via RRPs--and pay interest at an annual rate of 0.05%.
This had the desired effect of pushing Treasury yields back above 0% but now we see the HUGE numbers piling up in RRP as counterparties park their cash (up to $160 billion per counterparty now).
Remember, the RRP counterparties fall into four (thanks u/OldmanRepo for calling out!) groups: Primary Dealers, Money market funds, banks, and Government Sponsored (Fannie Mae, Freddie Mac, etc.).
The Fed doesn’t disclose who borrowed what the day of (Minor correction hat tip to u/DadPunsAreBadPuns: The Fed discloses the daily data two years after the quarter ends) but there is an end-of-month report:
On 11/30 the top three firms totaled 40% of RRP Usage:
- Fidelity’s funds combined had $288 billion in RRPs (19% of total RRPs)
- Vanguard in second with $165 billion (11% of total RRPs)
- Blackrock third with $155 billion (10%)
- JP Morgan used $134 billion (9.61%)
- Goldman Sachs used $95.6 billion (6.84%%)
- Morgan Stanley used $83.3 billion (6%)
I suspect today's RRP will drop back down to the $1.5T-$1.7T range we have seen of late but wanted to take a moment to point out why we are seeing the jumps we are and dig into the lagging data as to who is using the RRP facilities.
