(Bloomberg). – The total amount of money investors have parked at major Federal Reserve facilities climbed to an all-time record on the last trading day of 2012. This was as funds searched for places to keep short-term cash. 

More than 100 participants on Friday put a total of $1.905 trillion at the Fed’s overnight reverse repurchase agreement facility, in which counterparties like money-market funds can place cash with the central bank. On Dec. 20, the previous record was $1.758 trillion. Friday’s $208 billion leap was the biggest one-day increase in usage since June 17 after the central bank increased the offering yield to 0.05%. This compares with the $9.65 billion transaction on the previous trading day in 2020, when only 15 counterparties used the facility. 

This year’s record-breaking RRP Facility use and current cash glut in the money market are quite different from previous years. The final business day of each year has often proved to be a pressure point for funding markets, with borrowers clamoring for investors’ spare dollars and causing spikes in key lending rates. The landscape is changing.

Usage of the facility has exploded this year as investors need somewhere to park their short-term cash, and there is an imbalance in Treasury-bill markets that’s been fueled in large part by a drawdown of the U.S. government cash balance and Fed asset purchases. The end of every quarter has seen a surge in demand for the facility as dealers reduce their activities in the market to repurchase agreements to protect their regulatory balances. 

However, quarter-end factor factors aside, the market has been requesting the facility at a rate of $1 trillion per month since August. And strategists feel that this strong demand will continue until the central bank stops its asset purchase program. The Fed earlier this month said it will double the pace at which it’s scaling back purchases of Treasuries and mortgage-backed securities to $30 billion a month, putting it on track to conclude the program in early 2022, rather than mid-year as initially planned.

©2021 Bloomberg L.P.