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The Impact of Abundant Reserves on Money Markets and Policy
Implementation

Remarks at SIFMA’s Featured Webinar The Federal Reserve’s Outlook: Markets and Policy Implementation

Lorie Logan
April 15, 2021
The views presented here are those of the author and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System

Figure 1: Assets of the Federal Reserve
$ Billion

8,000

Treasuries
Agency MBS

7,000

Repurchase Agreements, Swaps, Credit, and Liquidity Facilities*

6,000

Other Assets**

5,000
4,000
3,000
2,000
1,000
0

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Source: Board of Governors of the Federal Reserve System H.4.1 Statistical Release
Note: * includes repurchase agreements, central bank liquidity swaps, primary and secondary credit, Primary Dealer Credit Facility, Money Market Mutual Fund Liquidity Facility, Paycheck Protection Program
Liquidity Facility, and net portfolio holdings of the Commercial Paper Funding Facility, Corporate Credit Facilities, Main Street Lending Program, Municipal Liquidity Facility and Term Asset-backed Securities
Loan Facility.
Note: ** includes agency debt, gold certificates, special drawing rights, coin; foreign currency denominated assets, bank premises, unamortized premiums and discounts on securities held outright, accrued
interest, net portfolio holdings of the Maiden Lane LLC, and other accounts receivables.

2

Figure 2: Liabilities of the Federal Reserve
$ Billion
8,000

FR Notes (Currency)
Reserves

7,000

Treasury General Account (TGA)
Overnight Reverse Repuchase Agreements*

6,000

Other Liabilities and Capital

5,000
4,000
3,000
2,000
1,000
0

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Source: Board of Governors of the Federal Reserve System H.4.1 Statistical Release
Note: * includes small volumes of term reverse repurchase agreement exercises in 2015.

3

Figure 3: Reserves as a Share of Total Assets Among Domestic Banks
Percent

$ Billion

4,500

14

Total Reserves (RHS)

4,000

12

3,500

Reserve Share of Total Assets (LHS)

10

3,000

8

2,500

6

2,000
1,500

4

1,000
2
0

Jan-08

500

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

0

Source: FFIEC 031, Board of Governors of the Federal Reserve System H.4.1 Statistical Release
Note: FFIEC 031 data is published on a quarterly basis, whereas the H.4.1 is published on a weekly basis.

4

Figure 4: Reserves Held by Domestic Banks
$ Billion

U.S. GSIBs
Small Domestics

1,600
1,400

Large Domestics
Other Depository Institutions

1,200
1,000
800
600
400
200
0

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Source: Board of Governors of the Federal Reserve System FR 2900
Note: Large Domestics refers to domestically chartered banks with greater than $50 billion in assets. Other Depository Institutions includes credit unions, entities in U.S. territories, and other
institutions not reporting assets.

5

Figure 5: Overnight Money Market Rates
Percent

0.25

IOER

EFFR

SOFR

0.20

0.15

0.10

0.05

0.00

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

Source: Federal Reserve Bank of New York, Board of Governors of the Federal Reserve System
Note: SOFR was not published on dates with a missing value due to market holidays.

6

Figure 6: OBFR Volumes by Bank Type
$ Billion

350

Foreign Banking Organizations

Domestic Banks

300
250
200
150
100
50
0

Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

Jan-21

Source: Federal Reserve Bank of New York
Note: The Overnight Bank Funding Rate (OBFR) is a measure of wholesale, unsecured, overnight bank funding costs calculated using federal fund transactions, certain Eurodollar transactions, and
certain domestic deposit transactions, all as reported in the FR 2420 Report of Selected Money Market Rates.

7

Figure 7: Year-to-Date Increases in Reserves by Bank Type
$ Billion

Percent

50

300

Dollar Change (LHS)

Percent Change (RHS)

250

45
40
35

200

30
150

25
20

100

15
10

50

5
0

FBOs

U.S. GSIBs

Other Domestic Banks

0

Source: Board of Governors of the Federal Reserve System FR 2900
Note: Based upon change in reserve levels from January 13, 2021 to April 7, 2021.

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Figure 8: Government Money Market Fund AUM and Asset Allocation
$ Billion

4,000

U.S. Treasuries

Repurchase Agreements

FRNs

Agency Debt

3,500
3,000
2,500
2,000
1,500
1,000
500
0

Jan-16

Source: iMoneyNet

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

Jan-21
9

Figure 9: Government and Prime Money Market Fund AUM
$ Billion

Count

4,000

600

Government (LHS)

3,500

Prime (LHS)

Number of Reporting Funds (RHS)
550

3,000
500

2,500
2,000

450

1,500

400

1,000
350

500
0

2014

2015

2016

2017

2018

2019

2020

300

Source: SEC Division of Investment Management
Note: All values correspond to year-end.

10

Figure 10: Money Market Spreads to IOER and Reserves
Percent

0.6

0.4

$ Billion

Reserves (RHS)
EFFR – IOER (LHS)

4,000

09/17/2019
SOFR – IOER: 3.15

SOFR – IOER (LHS)
ON RRP – IOER (LHS)

3,500
3,000

0.2

2,500

0.0

2,000
1,500

-0.2

1,000
-0.4

-0.6

Jan-15

500

Jul-15

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

Jan-21

0

Source: Federal Reserve Bank of New York, Board of Governors of the Federal Reserve System H.4.1 Statistical Release
Note: SOFR values prior to April 2018 are calculated via indicative data, indicated by the dashed series.

11

Figure 11: Banking System Assets as a Share of GDP
Percent

500

Japan

Euro area

U.K.

Canada

U.S.

450
400
350
300
250
200
150
100
50
0

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Source: Haver, Bank of Japan, European Central Bank, Bank of England, Bank of Canada, Federal Reserve
Note: Data excludes foreign banking organizations in each country.

12

Figure 12: Selected Other Federal Reserve Liabilities
$ Billion

600

Other Deposits

Foreign Official Deposits

FIMA Repo Pool

500
400
300
200
100
0

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Source: Board of Governors of the Federal Reserve System H.4.1 Statistical Release
Note: Other Deposits includes GSE deposits, DFMU deposits, deposits held by international and multilateral organizations, deposits held in joint accounts by depository institutions in connection to their
participation in certain private-sector payment arrangements, and certain deposit accounts other than the TGA for services provided by the Reserve Banks as fiscal agents of the United States.

13

Figure 13: First Percentile of Secured Money Market Rates
Percent

TGCR 1st Percentile – ON RRP

0.4

SOFR 1st Percentile – ON RRP

12/31/2018
SOFR 1st Percentile - ON RRP: 0.45

0.3
0.2
0.1
0.0
-0.1
-0.2
-0.3
-0.4

Apr-18

Oct-18

Apr-19

Oct-19

Apr-20

Oct-20

Apr-21

Source: Federal Reserve Bank of New York

14

Figure 14: Administered Rate Adjustments
Percent
0.25

Spread between Top and Bottom of Target Range
ON RRP – Bottom of Target Range

IOER – Bottom of Target Range

0.20
0.15
0.10
0.05
0.00
-0.05

Jan-15

Jul-15

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

Jan-21

Source: Federal Reserve Bank of New York, Board of Governors of the Federal Reserve System

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