Reverse Repurchase Agreements: The Opposite Side of the Repo Trade

Reverse repurchase agreements are just the opposite side of the repo trade. It's literally just the reverse position from a counterparty perspective. This is just a way for the Fed to soak up liquidity as opposed to repurchase agreements where the Fed is going to inject liquidity. Usually what you see is these things can spike and that's perfectly normal because you will have market conditions changing faster than the Fed can conduct its open market operations.