Banks tap record liquidity from New York Fed's Standing Repo Facility

• The $74.6 billion borrowed was collateralized with $31.5 billion in Treasury bonds and $43.1 billion in mortgage-backed securities
• The Fed has been actively encouraging eligible firms to use the facility after initial hesitancy, with officials noting that 'sizeable participation' is appropriate when economically justified
• Market participants expect the borrowing surge to be temporary and dissipate in the coming days as normal trading conditions resume

Financial firms borrowed a record $74.6 billion from the Federal Reserve Bank of New York's Standing Repo Facility on Wednesday, December 31, 2025, marking the highest usage since the facility's inception. This surpassed the previous record of $50.35 billion set on October 31, 2024.

The borrowing was collateralized with $31.5 billion in Treasury bonds and $43.1 billion in mortgage-backed securities. This surge occurred on the final trading day of 2025, as banks and other eligible institutions managed year-end liquidity needs.

Year-end periods typically see increased liquidity demands as lenders pull back for various reasons, including regulatory reporting requirements and balance sheet management. Market participants had anticipated elevated borrowing levels, and the activity aligned with estimates.

The New York Fed scheduled a second repo operation at 1:45 p.m. ET, along with a reverse repo facility operation. Officials expect borrowing levels to normalize in the coming days as regular trading conditions resume.

Roberto Perli, who oversees monetary policy implementation at the New York Fed, has been actively encouraging eligible counterparties to utilize the Standing Repo Facility. The Fed has observed historical hesitancy among financial firms to tap this liquidity source, despite its availability and economic viability.

The Standing Repo Facility serves as a backstop for financial institutions facing temporary funding needs, providing overnight loans against high-quality collateral. This record usage demonstrates the facility's effectiveness in addressing year-end funding pressures and may signal growing comfort among market participants with utilizing Fed liquidity tools.