Roberto Perli, the person who actually runs the Federal Reserve Bank of New York’s trading desk, is waving a yellow flag at short-term funding markets. His message: higher Treasury bill issuance is tightening money market conditions, and participants should pay attention.
The mechanics of a $350 billion drain
Between early July and mid-September, the Treasury issued a wave of new bills to rebuild the Treasury General Account, essentially the government’s checking account at the Fed, to roughly $800 billion. Every dollar that flows into the TGA is a dollar pulled out of the banking system’s reserves. The government sucked $350 billion out of the financial system’s liquidity pool to refill its own coffers.
The collateral damage showed up immediately in the Fed’s Overnight Reverse Repo facility. The ON RRP saw its balances crater from around $200 billion to effectively zero. When money market funds and other participants stop parking cash at the Fed, it means they’re deploying it elsewhere into private financial instruments, favoring the relatively higher yields offered by T-bills.
Perli specifically noted that repo rates have become far more sensitive to the timing of Treasury bill issuance. When the government dumps a big batch of bills on the market, short-term borrowing costs can spike unpredictably.
The Fed’s response: Reserve Management Purchases
In December 2025, the New York Fed launched what it calls Reserve Management Purchases, or RMPs, buying Treasury bills at an initial pace of roughly $40 billion per month. By early 2026, that pace tapered to somewhere in the $10 billion to $25 billion range. RMPs are designed to offset the reserve drain caused by Treasury issuance and ongoing balance sheet runoff, not to stimulate the economy or push down long-term yields.
Perli flagged in November 2025 remarks that tighter conditions were already pushing banks and dealers to use the Standing Repo Facility more frequently, and not just on the typical month-end and quarter-end dates when funding pressures traditionally spike.
Why crypto markets should care
For stablecoin issuers and DeFi protocols that rely on Treasury bill yields for their business models, the increased T-bill supply has a more direct effect. Higher bill issuance pushes short-term yields up, which is good for stablecoin backing returns in isolation. But the accompanying volatility in repo rates introduces operational risk for any protocol that depends on stable short-term funding.
Investors should watch ON RRP balances, SRF usage frequency, and the spread between the Secured Overnight Financing Rate and the Fed’s target range. When SOFR consistently prints near the top of the range, or the SRF sees elevated non-quarter-end usage, those are early warnings that liquidity conditions are tightening beyond comfort levels.