Bank of America write “to assess the degree of liquidity abundance, we believe the most simple and straightforward indicator is the balance of Fed ON RRP. Meaningfully positive use of Fed ON RRP implies there is excess liquidity in the financial system. If banks find themselves short on liquidity they can find ways to pull this cash out of Fed ON RRP via FHLB use, issuing directly to prime fund users of ON RRP, or competing more aggressively for deposits with MMF investors.”

• “Once ON RRP take-up reaches near zero it is no longer obvious that there is abundant excess liquidity in the system.”
• “Dallas Fed President Logan agrees with our assessment on the ON RRP balance. In early Jan Logan wrote: "we should slow the pace of runoff as ON RRP balances approach a low level." We are not sure of Logan's judgement around the ON RRP "low level" but believe it is likely $200-250bn. At the recent ON RRP run rate, the low level of $200-250bn could be reached in March.”