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Insights from MMF Portfolio Allocations amid Balance Sheet Normalization

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  • Erik Bostrom

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.

Suggested Citation

  • Erik Bostrom, 2025. "Insights from MMF Portfolio Allocations amid Balance Sheet Normalization," FEDS Notes 2025-03-03-2, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2025-03-03-2
    DOI: 10.17016/2380-7172.3709
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