The #ReverseRepoFacility (#RRP) is a tool used by the #FederalReserve (Fed) to manage short-term interest rates and liquidity in the financial system.

It allows eligible counterparties, such as money market funds and government-sponsored enterprises, to lend cash to the Fed in exchange for Treasury securities on an overnight basis.

When the Fed conducts large auctions of new treasuries at higher rates, it can attract investors seeking higher yields. This influx of funds into the market can lead to downward pressure on short-term interest rates.

The Fed may then use the RRP to absorb excess liquidity, helping to keep short-term rates within its target range and maintain control over monetary policy.