That had a knock-on effect on money market funds, the main user of reverse repos, which surged cash into the reverse repo facility.
Meanwhile, banks reduced short-term debt offerings, constraining what money funds could invest in.
The reverse repo tool offers money market funds and other firms a place to park cash at the Fed overnight and earn a return.
The Fed’s reverse repo facility was largely unused into the spring of 2021 and then inflows steadily ramped up.
Some have made the case that as the Fed raises rates and reduces the size of its balance sheet to combat high inflation, inflows to the reverse repo facility should decline over time.