an empty tank

$2.5 trillion.

an empty tank

In early 2023,
It is the money that was piled up in the Fed’s ONRRP window. Money market funds have nowhere to go
The place where interest was received by leaving it to the Fed overnight.
It was a huge buffer tank of the financial system.

The tank is empty.

Now in 2026,
The balance is virtually zero.
In just over two years, 2.5 trillion has evaporated.

As the T-bill rate exceeds the reverse repo rate,
Money naturally exited in pursuit of better returns.
The market called it “normalization.” It’s not wrong.
However, on the other side of normalization
There is a truth that no one tells.

The buffer is gone.

In the past, even if there was a fund rush at the end of the quarter,
Even if liquidity is suddenly lost on the day of tax payment,
A huge water tank called the reverse repo absorbed the shock.

The tank is empty now.
The liquidity that QT takes out
Now, it will directly hit the bank’s reserves.
The same goes for the rise and fall of the Treasury General Account (TGA).

When the government collects taxes, it loses money from the market,
When you spend, you come back.
This vibration was previously attenuated by the reverse repo.
It’s at the bottom right now.

Do you remember September 2019.
Repo Interest Rate Overnight Without Notice
It soared to 10 percent.
It calmed down only after the Fed started supplying emergency liquidity.
Even then, the surface was calm.
The problem always bursts first in the piping.

Fed officially ends QT in December 2025,
This is why it switched to short-term government bond purchases (RMPs).
Because I thought the tank was empty.

The financial system is like a swimming pool.
No one is worried about the drain when the water overflows.
Cracks on the floor are visible only when the water level is lowered.