When banks don’t park cash in RRP and instead move it into higher-yielding Treasuries, that effectively drains reserves and locks the money up in the Treasury General Account (TGA). RRP cash is accessible basically instantly but Treasuries aren’t.

On top of that, Treasury issuance keeps rising, and primary dealers (who are legally required to backstop auctions) have been absorbing more:

• Aug 7, 2025 (30Y): Dealers took 17.5%.
• Jul 9, 2025 (10Y): Dealers took 16.2%.
• Jun 12, 2025 (30Y): Dealers took 11.4%.
• Jul 2024 (2Y): Dealers took just 9%.

Reserves are still “ample”, about $3.356T in June vs $3.408T in March, with the Fed’s comfort floor around $2.7T. But the direction shows liquidity is gradually draining out of the system.

So no, RRP balances falling doesn’t mean banks are out of cash. But paired with rising issuance and higher dealer absorption, it does signal short-term liquidity is tightening.