$57.492B: RRP Falls Below February’s Floor

Why Sub-$60B Now Is a Louder Alarm Than February

The “airbag” is smaller — and it’s the wrong moment for it.
We’re at $57.492B in RRP — lower than any point in Feb ’25 and barely above the cycle low of $54.772B (Apr 16). The buffer is now razor-thin. In a crisis, that’s the difference between a jolt you can absorb… and a head-on collision.

The stress backdrop hasn’t eased — it’s entrenched.

• Japan 30Y ≈ 3.08% / US 30Y ≈ 4.841% → long-end pressure remains.

• 3Y SOFR–OIS at 24.4 bps → mid-term funding stress premium remains elevated.

• SOFR volume ≈ $2.796T → near record high reliance on overnight funding (leverage increasing).

• 10Y swap spread –26.3 bps → markets still prefer synthetic hedges to real collateral (lack of liquidity at the base layer).

Collateral competition is now a constant knife-fight.
The RRP rate (~4.25) still lags T-bill and hot-repo yields, so MMFs bypass the Fed. That keeps the “official” locker under-stocked while intensifying the chase for specific individual Treasuries in the wild — where scarcity breeds higher specials, tighter dealer balance sheets, and stickier stress. In Feb this trend began. Now, it’s settled in — at a lower base.

Silver’s float still hasn’t recovered — and price punished shorts.
SLV borrow rate dipped back to 0.61%, but shares available are still only ~2.5M (vs 6.4M nine days ago), while silver’s price jumped from $37.09 to $38.633. Translation: shorts capitulated, but supply never refilled. In a low-RRP environment, fewer ETF creations/arbs get done, so paper-to-physical liquidity stays impaired.

The Net Picture

• February: Sub-$100B for most of the month flagged a coming liquidity crunch → selloff began in March.

• Today: Lower RRP, same or worse structural stresses, and persistent tightness in hard-asset collateral.

• That’s less shock absorption + equal or greater risk — a setup that’s mechanically more fragile than February.

RRP: The Patch on the Patch in the Foundation of the World’s Financial Skyscraper

First principles:
The entire global financial system rests on one thing — U.S. Treasuries.

They are the base layer collateral. Every derivative, every loan, every repo, every dollar that circulates — all of it ultimately traces back to the trust, liquidity, and availability of those bonds.

In a true free market, the price (yield) of Treasuries would be set purely by supply and demand. That’s what makes the base layer stable — when the most foundational asset in the system trades at a true market equilibrium.

But here’s the distortion:
When a central bank buys Treasuries, that’s QE — artificial demand injected at the base layer. It’s not “neutral market support.”

It’s an intervention that caps bond yields and shrinks the float of freely available collateral. Think of it like tampering with the foundation of a skyscraper while the upper floors are still being built — everything above becomes dependent on the artificial shape you’ve created.

The RRP is a workaround to that distortion.
The Fed takes some of those same Treasuries it bought in QE and recycles them through the Reverse Repo Facility, lending them out overnight to money market funds.

This isn’t some ancient, time-tested market feature — it’s a patch to fix the side effects of a patch. The facility didn’t even exist in “good times” as a standing structure. It’s a modern prosthetic limb bolted onto a base layer the Fed already altered.

Bringing It All Home

This isn’t just another data point — it’s the scaffolding of the entire global market groaning under its own weight. The RRP was never meant to be a permanent pillar; it’s a jerry-rigged workaround to the very imbalance the Fed created when it began buying the base layer collateral itself.

Add in persistent stress signals across the 10 Year Swap Spread, 3 Year SOFR-OIS, & in difficulty sourcing physical silver - the picture sharpens: this is a foundation where both the engineered fix and the raw material it protects are under strain. When the base layer buckles, everything built on top moves — all at once.

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Luke Lovett
📲 Cell: 704.497.7324
🌐 Undervalued Assets | Sovereign Signal
📧 Email: [email protected]

Disclaimer:
This content is for educational purposes only—not financial, legal, tax, or investment advice. I’m not a licensed advisor, and nothing herein should be relied upon to make investment decisions. Markets change fast. While accuracy is the goal, no guarantees are made. Past performance ≠ future results. Some insights paraphrase third-party experts for commentary—without endorsement or affiliation. Always do your own research and consult a licensed professional before investing. I do not sell metals, process transactions, or hold funds. All orders go directly through licensed dealers.