The Secured Overnight Financing Rate settled at 3.94 percent on October 28, 2026, four basis points above the 3.90 percent the Federal Reserve pays banks on their reserve balances. It was the fourth consecutive session the benchmark repo rate finished above that floor. On the same day, reserve balances held at Federal Reserve banks fell to 2.894 trillion dollars, down 68.8 billion dollars on the week and the lowest weekly reading since December 3, 2025, according to the H.4.1 release the Board of Governors published on October 29. The cash did not leave the financial system so much as change hands. Treasury’s operating account at the Fed rose 70.5 billion dollars over the same week to 1.016 trillion dollars, its highest weekly close since March 31, 2021. The overnight reverse repurchase facility, the Fed’s cash absorption valve, held 353 million dollars on October 29, leaving almost no cushion. None of this moved the prime rate, which sits at 7.00 percent after the Committee held its target range on October 28, as our current prime rate page and Federal Reserve balance sheet tracker record. It does shape what the Committee can comfortably do next.
- Reserve balances fell $68.8 billion to $2.894 trillion in the week ended October 28, the lowest since December 2025.
- SOFR printed 3.94% on October 28, four basis points above the 3.90% paid on reserve balances.
- Treasury’s account at the Fed rose $70.5 billion to $1.016 trillion, the highest weekly close since March 2021.
- The reverse repo facility held $353 million on October 29, leaving no buffer against a further drain.
- Prime stays at 7.00%. The next FOMC decision lands December 9.
Where the $69 Billion in Reserves Went
Reserve balances are the deposits commercial banks keep at the Federal Reserve, and they are the raw material of the overnight funding market. The H.4.1 statistical release published on October 29 put them at 2,893,770 million dollars for the week ended October 28, against 2,962,607 million dollars a week earlier. The cumulative drain since the week ended October 7 comes to 135.9 billion dollars. The last time the weekly series printed lower was December 3, 2025, when reserves closed a week at 2.858 trillion dollars. Reserves sit on the liability side of the Fed’s books, so they fall when another Fed liability rises. In the week just reported, one liability did nearly all of the work.
That liability was the Treasury General Account, the federal government’s checking account at the Fed. It stood at 1,015,632 million dollars on October 28, up from 945,153 million dollars on October 21. The 70.5 billion dollar increase almost exactly offsets the 68.8 billion dollar fall in reserves. Treasury’s balance climbs when tax receipts arrive and when debt sales raise more than the department pays out, and both have run the same way this month. The account has not closed a week this high since March 31, 2021. Total federal debt outstanding reached 40.551 trillion dollars on October 28, and financing a stock that size keeps a large working balance parked at the central bank.
Repo Rates Closed Above the Fed’s Floor Four Days Running
The Federal Reserve sets a corridor rather than a single price. It pays interest on reserve balances, currently 3.90 percent, and expects that rate to act as a floor, because a bank that can earn 3.90 percent risk free at the Fed has little reason to lend cash into the market for less. When the secured overnight financing rate climbs above that floor and stays there, it signals that cash has grown scarce enough for borrowers to bid it up.
That is what the New York Fed’s reference rate data shows. SOFR printed 3.88 percent on October 21 and 3.90 percent on October 22, then 3.92, 3.93, 3.95 and 3.94 percent on October 23, 26, 27 and 28. Four straight business days closed above the 3.90 percent floor. The October 27 gap of five basis points was the widest of the run, and the spread had not reached four basis points on any day since June 15. The 99th percentile of October 27 transactions cleared at 4.04 percent, 14 basis points above what the Fed pays. The effective federal funds rate, which measures unsecured lending between banks, has not moved from 3.88 percent across the same stretch. The pressure is concentrated in the repo market, where dealers finance Treasury inventory, and it has built steadily since the middle of October.
Why the Fed’s Balance Sheet Barely Moved
Total assets on the Fed’s books came to 6.746 trillion dollars in the week ended October 28, down 7.97 billion dollars from 6.754 trillion a week earlier. Set against a 68.8 billion dollar fall in reserves, that is close to a rounding error, and the gap is the whole story. Asset runoff is no longer the main thing draining reserves. The Fed’s holdings of Treasury securities rose by 3.9 billion dollars to 4.577 trillion as maturing proceeds were reinvested. Mortgage backed securities fell 11.7 billion dollars to 1.884 trillion through ordinary prepayments. Netted together, the portfolio is roughly flat.
With assets steady, the composition of liabilities decides where reserves land, and the reverse repurchase facility no longer has the depth to absorb a swing. Counterparties placed 226 million dollars there on October 27, 176 million on October 28 and 353 million on October 29. A facility that once served as the system’s shock absorber is effectively empty, so a Treasury cash build now subtracts straight from reserves. Banks have started touching the other side of the Fed’s plumbing instead. The Standing Repo Facility, which lends cash against Treasury collateral, accepted 4 million dollars on October 27, 6 million on October 28 and 31 million on October 29. The amounts are small enough to ignore in isolation. The direction across three sessions is harder to ignore.
What Tighter Funding Means for Your Money
None of this changes a consumer rate today. The prime rate published in the Fed’s H.15 release is 7.00 percent, set by banks at three percentage points above the top of the 3.75 percent to 4.00 percent federal funds target range, and it moves only when the Committee moves that range. Our current prime rate page carries the daily reading and how Fed decisions affect your loans explains the pass through from policy to a credit card statement.
Funding pressure matters in two other places. The first is deposit pricing. Money market funds and banks compete for the same overnight cash, and a repo rate printing above what the Fed pays supports yields on money funds and on the best paying accounts listed on our high yield savings and CD rate pages. The second is policy itself. Scarce reserves argue against tightening further, which is the opposite of what two Committee members wanted on October 28, when Lisa Cook and Beth Hammack dissented in favor of a quarter point increase. A central bank watching repo rates break through its own floor has a reason to pause, or to stop shrinking its balance sheet, before adding another quarter point to prime. Further out the curve the signal differs: the ten year Treasury yield finished October 28 at 5.05 percent, and mortgage pricing tracks that benchmark far more closely than prime, as our current mortgage rates page shows.
Two free public releases tell you whether this tightens further. The New York Fed posts SOFR each business morning, so you can read the spread against the 3.90 percent floor before markets open, and the Board publishes H.4.1 every Thursday afternoon with new reserve and Treasury account figures. If reserves keep falling while SOFR keeps closing above 3.90 percent, shop a deposit rate now rather than later, because the same pressure that lifts money fund yields argues against another hike to prime.
Frequently Asked Questions
Why did bank reserves fall $69 billion?
Treasury moved cash into its account at the Federal Reserve. The Treasury General Account rose 70.5 billion dollars to 1.016 trillion in the week ended October 28, while reserve balances fell 68.8 billion dollars to 2.894 trillion over the same week. The two are opposite sides of the same balance sheet.
What does it mean when SOFR trades above the Fed’s floor rate?
It means overnight cash is scarce enough that borrowers will pay more than the Federal Reserve pays. The Fed credits 3.90 percent on reserve balances, so a bank with spare cash has a risk free alternative to lending in the repo market. SOFR closed at 3.94 percent on October 28, the fourth straight session above that floor, and the 99th percentile of October 27 trades cleared at 4.04 percent. Sustained prints above the floor are the standard signal that reserves have moved from ample toward scarce.
Does falling reserves change the prime rate?
Not directly. The prime rate is 7.00 percent, set by banks at three percentage points above the top of the federal funds target range, which the Committee held at 3.75 percent to 4.00 percent on October 28. Conditions in the repo market do not enter that formula. What they can change is the Committee’s calculation, because a central bank managing scarce reserves has one more reason to avoid tightening. The next scheduled chance to move the range, and therefore prime, is December 9.
What is the Treasury General Account?
It is the federal government’s operating checking account, held at the Federal Reserve rather than at a commercial bank. Tax receipts and the proceeds of debt sales flow in, and federal payments flow out. Because it sits on the liability side of the Fed’s balance sheet alongside bank reserves, a rising Treasury balance pulls reserves down dollar for dollar unless the Fed offsets it. The account closed the week ended October 28 at 1.016 trillion dollars, its highest weekly level since March 31, 2021.
Is the Federal Reserve still shrinking its balance sheet?
Only at the margin. Total Fed assets stood at 6.746 trillion dollars in the week ended October 28, down 7.97 billion dollars from the week before. Treasury holdings rose 3.9 billion dollars to 4.577 trillion as maturing proceeds were reinvested, while mortgage backed securities fell 11.7 billion dollars to 1.884 trillion through ordinary prepayments. The 68.8 billion dollar drop in reserves that week came from the Treasury’s cash build, not from asset runoff.
Should I move cash into savings or a CD now?
Overnight benchmarks above the Fed’s floor tend to support deposit yields, because money funds and banks bid for the same pool of cash. That argues for shopping rates while the pressure lasts rather than after it clears. Compare the top paying options on our high yield savings and CD rate pages, then weigh a fixed term against the chance the Committee raises its range on December 9. A CD locks today’s yield. A savings account keeps the upside if rates climb.
Watching Reserves Into the December 9 Decision
The next H.4.1 release lands Thursday, November 5, and it will show whether Treasury’s cash build carried into November. Two readings decide how urgent this gets: whether reserves break below the December 2025 low of 2.858 trillion dollars, and whether SOFR keeps closing above 3.90 percent. If both happen, the Committee will weigh a rate increase on December 8 and 9 while its own funding market signals that cash is tight. Our Fed balance sheet tracker, Fed meeting schedule and Fed rate forecast pages carry each release as it posts.
References
- Board of Governors of the Federal Reserve System. “H.4.1 Factors Affecting Reserve Balances of Depository Institutions.” Released October 29, 2026. federalreserve.gov
- Federal Reserve Bank of New York. “Secured Overnight Financing Rate, reference rate data.” Accessed October 30, 2026. newyorkfed.org
- Federal Reserve Bank of New York. “Repo and Reverse Repo Operation Results.” Accessed October 30, 2026. newyorkfed.org
- Board of Governors of the Federal Reserve System. “H.15 Selected Interest Rates.” Accessed October 30, 2026. federalreserve.gov
- Board of Governors of the Federal Reserve System. “Federal Reserve issues FOMC statement.” October 28, 2026. federalreserve.gov
- Board of Governors of the Federal Reserve System. “FOMC Calendars, Statements, and Minutes.” Accessed October 30, 2026. federalreserve.gov
- Federal Reserve Bank of St. Louis. “Reserve Balances with Federal Reserve Banks, Interest Rate on Reserve Balances and SOFR series.” Accessed October 30, 2026. fred.stlouisfed.org
- U.S. Department of the Treasury, Bureau of the Fiscal Service. “Debt to the Penny.” Record date October 28, 2026. fiscaldata.treasury.gov
