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© Reuters. FILE PHOTO: Federal Reserve Board building is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo By Gertrude Chavez-Dreyfuss and Jonnelle Marte

NEW YORK (Reuters) – Volume at the U.S. Federal Reserve’s reverse repurchase facility topped $1 trillion on Friday for the first time as investors and financial institutions continued to pour cash into the overnight window.

Demand for the Fed’s reverse repo facility has surged as the U.S. debt ceiling looms, the Treasury department cuts down on its bill issuance and financial firms struggle to find places to invest their excess cash.

The financial system is swimming in about $4 trillion in reserves, which are rising in part because of the U.S. central bank’s asset purchases, the drop in Treasury bill issuance and a rapid drawdown in the government’s store of funds at the Fed. The Treasury General Account, or TGA, has dropped by more than $1 trillion since last fall.

The Fed said firms parked $1.04 trillion overnight at the reverse repo facility on Friday. There were 86 bidders, including money market funds and other eligible financial institutions.

Volume at the reverse repo facility soared further last month after the Fed raised the rate it pays on reverse repo agreements to 0.05% from 0% as part of technical adjustments to keep the effective federal funds rate from falling too low.

The Treasury department has had to run down its cash balances ahead of July 31, when the nation’s debt ceiling comes back into effect. That pushes more cash into a financial system already swimming with liquidity.

The Treasury department said https://home.treasury.gov/news/press-releases/jy0164 in May that it was targeting a cash balance of $450 billion by July 31. As of Wednesday’s data https://fsapps.fiscal.treasury.gov/dts/files/21072800.pdf, it was $537 billion.

“It is forcing them to pay down their bill supply to get down to this number, maybe more quickly than they would want,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities.

Analysts say demand for the Fed’s reverse repo facility could keep rising as reserves remain elevated. Usage of the program could top $2 trillion by the end of the year, estimates Scott Skyrm, executive vice president in fixed income and repo at Curvature Securities.

Fed Chair Jerome Powell said earlier this week that the program is working as intended by helping to set a floor for short-term interest rates and ensuring that rates stay within the Fed’s target range.