Fed's SRF sees no draw early Tuesday despite expectations for quarter-end surge

Core Insights - The Federal Reserve's Standing Repo Facility (SRF) experienced no demand during its first daily auction, contrary to Wall Street expectations for banks to seek funding amid the quarter-end period [1][2]. Group 1: Federal Reserve and SRF - The SRF, created in 2021, allows eligible firms to convert bonds into cash quickly, but it saw no funds drawn in its recent operation [2]. - Market participants had anticipated that up to $50 billion in overnight funds could be withdrawn, but the largest draw to date was only $11 billion on June 30 [3]. - The current quarter-end period is expected to be particularly volatile due to the Fed's ongoing liquidity withdrawal as part of its balance sheet reduction [4]. Group 2: Market Conditions - Quarter-end periods are typically volatile as firms adjust their cash management strategies for various reasons [4]. - The SRF is designed to act as a buffer for temporary liquidity shortfalls in the market, although its effectiveness in this role has been questioned [4].