in practice, FED’s SRF is used when there is a scarcity of liquidity/cash the market has US bonds & needs cash, so lenders increase rates SRF sets a daily rate. if that rate is smaller than in the smaller repo market - the dealers instead borrow USD directly from the FED

Illya Gerasymchuk 2025-07-07 17:56

with SRF the FED sets an upper limit on repo market rates most of the collateral is US Treasury bonds this exerts downward pressure on bond yields - by preventing sell-offs