Illya Gerasymchuk
Financial & Software Engineer
Overnight Reverse Repo Rate (ON RRP) defines the rate at financial institutions can lend money overnight to the FED
Overnight Reverse Repo Rate (ON RRP) defines the rate at financial institutions can lend money overnight to the FED
in return the FED provides treasury bonds as a collateral
ON RRP is accessible to both banks & non-banks (e.g. money market funds)
since banks can always deposit cash into their reserve account account at the FED and earn the IORB rate they have little incentive to lend at rates below IORB
effectively, this sets the floor (lower bound of the corridor) for interest rates for banks