US money‑market funds absorbed roughly $120 billion this month, swelling liquidity after a year of funding strain. The surge drove overnight repo rates below the Federal Reserve’s target band and pushed the effective federal funds rate down twice in the past 30 days. Strategists say the excess cash reflects structural shifts rather than seasonal quirks and pushes yields on short‑term Treasuries lower.

Regulators eased the enhanced supplementary leverage ratio, letting major banks hold larger Treasury inventories. Dealer holdings hit a record $557 billion at March‑end, while Wells Fargo expanded its repo financing after its asset‑cap lift, adding tens of billions of balance‑sheet capacity. This expanded capacity supports the Fed’s runoff. The eight US systemically important banks grew assets by $1.3 trillion in Q1, bolstering cash‑collateral dynamics.

With Treasury bill purchases now throttled to $10 billion a month, the Fed may pause further reductions if repo markets stay loose. Lower rates have already eased Treasury issuance pressure and freed banks from hoarding reserves, reshaping short‑term funding supply. Traders observe rates hovering near 3.40%, suggesting the excess cash will keep overnight financing cheap for the near term. Investors therefore benefit from stable financing costs.