demand for the federal reserve’s popular overnight reverse repo facility has dropped to about 18 trillion daily from its near 26 trillion peak in december in the wake of the june us debtceiling deal the fed facility has been a key cog in the plumbing of financial markets for the past two years as global central banks responded to the covid pandemic by slashing benchmark rates and conducting asset purchases to prop up wobbling economies the program became a haven for moneymarket funds and other institutional investors looking to earn riskfree yield with demand hitting a peak of nearly 26 trillion overnight in december 2022 as markets were awash in liquidity demand again spiked in march 2023 see chart after the collapse of silicon valley bank led to fears of a broader regional banking crisis but daily usage retreated once the fed rolled out another emergency facility for banks to tap for liquidity to avoid forced asset sales and as the june us debtceiling deal unleashed a flood of treasury issuance at some of the highest yields in years the continued drop in demand for the overnight fed program comes as the central bank’s aggressive pace of rate hikes has prompted higher shortterm treasury yields the 6month treasury bill rate tmubmusd06m was at 55 on monday according to factset while the oneyear treasury yield tmubmusd01y was at 54 and the 2year rate tmubmusd02y was at 485 the benchmark 10year treasury yield was near 4 the overnight rate for the fed’s reverse repo was close to 505 in the range of the central bank’s target 5525 level to fight inflation cleveland fed president loretta mester said monday that the central bank likely needs to raise rates a bit more to drive inflation down to its 2 annual target the treasury department has unleashed a deluge of new bills to restock its coffers run low by the protracted fight over raising the us debt ceiling the treasury’s cash balance has since increased to over 500 billion according to barclays researchers stocks were mixed monday as investors awaited inflation data on wednesday from the monthly consumerprice index the dow djia was up about 130 points or 04 on monday while the sp 500 index spx was flat and nasdaq composite index comp was lower read inflation rates will keep cooling consumers say except in one notable area