On Thursday, after the Fed began paying interest to prevent negative interest rates in some US financial markets, investors deposited a record amount of cash in the Fed’s overnight loan facility.

The change announced after Wednesday’s monetary policy meeting was in response to Money market fund And banks that have been struggling to find a place for high-yield investment.

Nearly 70 market participants deposited $756 billion in the Federal Reserve through its reverse repurchase program. data From the New York branch of the Central Bank.

This is approximately US$172 billion higher than the record earlier this week and US$235 billion higher than Wednesday, when only 53 groups used the facility.

According to Gennadiy Goldberg of TD Securities, “the sharp increase in usage shows how much investors are eager for yields on short-term debt.”

The Federal Reserve stated that it is raising the RRP interest rate from zero to 0.05% to support the “smooth operation of the short-term financing market,” one of two technical adjustments made on Wednesday. It also raised interest on excess reserves deposited by banks with the Federal Reserve from 0.1% to 0.15%.

Partly due to monetary and fiscal stimulus measures in the US economy, cash has been pouring into money market funds that invest in short-term government securities. The surge in demand for these securities sometimes pushed yields below zero this year and threatened the viability of the $4 trillion industry.

The interest rate at which investors convert U.S. Treasury bonds and other high-quality collateral into cash in the repo market (another major source of income for money market funds) has also fallen to negative numbers.

Wednesday’s adjustment will help lift these interest rates from ultra-low levels. The Fed funds rate, the main policy rate used by the Federal Reserve, also rose to 0.08%, close to the midpoint of the central bank’s 0 to 0.25% target range, and it fell to 0.04% earlier this year.

Federal Reserve Chairman Jay Powell, expression At his post-conference press conference, the utilization rate of the RRP facility is increasing, which shows that it is working as expected.

“We think the reverse repurchase tool is doing what it is supposed to do, which is to provide a lower bound for money market interest rates and keep the federal funds rate within its range.”

Scott Skyrm, a repo trader at Curvature Securities, said that the interest rate adjustment announced on Wednesday will help, but RRP demand may remain high. He said that the Fed’s commitment to buy $120 billion in government bonds every month to stimulate the economy continues to exacerbate the mismatch between the amount of cash to find housing and the amount of securities that can be purchased.

John Canavan, an analyst at the Oxford Economics Institute, said the scale of growth in RRP usage on Thursday was surprising.

“This is unlikely to be the end of the upswing. The massive influx of front-end cash is likely to drive RRP demand to more than $1 trillion at some point.”