For example, in mid-September 2019, strains in funding markets emerged as quarterly corporate tax payments and the settlement of Treasury securities coincided and resulted in a large amount of cash being drained from short-term interest rate investments. In fact, reserve balances fell more than $ billion over just two days.
Although the drain in reserves associated with seasonal tax payments was expected to put some upward pressure on short-term interest rates, the increases in rates that materialized were exceptionally large by historical standards. One such interest rate is the Secured Overnight Financing Rate, a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.