The Federal Reserve Board's "Minutes of the Federal Open Market Committee, April 30-May 1, 2019" tells us, "The deputy manager reviewed developments in domestic money markets.... In early April, the Treasury reduced bill issuance and allowed the TGA balance to fall in anticipation of individual tax receipts. As tax receipts arrived after the tax date, the TGA rose to more than $400 billion, resulting in a sharp decline in reserves over the last two weeks of April. Against this backdrop, the distribution of rates on traded volumes in overnight unsecured markets shifted higher. The effective federal funds rate (EFFR) moved up to 2.45 percent by the end of the intermeeting period, 5 basis points above the interest on excess reserves (IOER) rate. Several factors appeared to spur this upward pressure. Tax-related runoffs in deposits at banks reportedly led banks to increase short-term borrowing, particularly through Federal Home Loan Bank (FHLB) advances and in the federal funds market.... In addition, rates on Treasury repurchase agreements (repo), were, in part, pushed higher by tax-related outflows from government-only money market mutual funds and a corresponding decline in repo lending by those funds. Elevated repo rates contributed to upward pressure on the federal funds rate, as FHLBs reportedly shifted some of their liquidity investments out of federal funds and into the repo market. In addition, some market participants pointed to heightened demand for federal funds at month end by some banks in connection with their efforts to meet liquidity coverage ratio requirements as contributing to upward pressure on the federal funds rate. The deputy manager also discussed a staff proposal in which the Board would implement a 5 basis point technical adjustment to the Interest on Required Reserves (IORR) and IOER rates. The proposed action would bring these rates to 15 basis points below the top of the target range for the federal funds rate and 10 basis points above the bottom of the range and the overnight reverse repurchase agreement (ON RRP) offer rate. As with the previous technical adjustments in June and December 2018, the proposed adjustment was intended to foster trading in the federal funds market well within the target range established by the FOMC. A technical adjustment would reduce the spread between the IOER rate and the ON RRP offering rate to 10 basis points, the smallest since the introduction of the ON RRP facility. The staff judged that the narrower spread did not pose a significant risk of increased take-up at the ON RRP facility because repo rates had been trading well above the ON RRP offer rate for some time. However, if it became appropriate in the future to further lower the IOER rate, the staff noted that the Committee might wish to first consider where to set the ON RRP offer rate relative to the target range for the federal funds rate to mitigate this risk."

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