Back in September when the repo market exploded, causes were attributed to corporate tax payments and T-bill settlements. Was hoping someone could help elaborate further on the mechanism as to how T-bill settlements affect reserves.

For context, this CNBC article (https://www.cnbc.com/2019/10/22/fed-repo-worries-continue-over-the-efforts-to-fix-funding-issues.html) is quoted:

"The Fed has said that large settlements of Treasury auctions were at the root of September’s disturbance — along with payment of corporate income taxes — that sapped money out of the system."

A Bloomberg piece also stated that: "Repo rates may become jumpy in mid-December as some investors fear a repeat of the conditions that triggered September's turmoil: quarterly corporate tax payments that drained cash from the system, coupled with Treasury settlements that prompted a rush for reserves."

In essence, how do Treasury settlements sap money out of the system and trigger a demand for reserves? As much info/any helpful references would be greatly appreciated. Thank you!



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