In an effort to find a place for large amounts of money, demand for the Fed's reverse repo tool to control short-term interest rates rose to a record high for the second day in a row.

On Thursday, about 46 institutions deposited about $497.4 billion with the Fed through overnight reverse repurchase agreements. That surpasses the record of $486.1 billion set on Monday, according to the New York Fed.

The Fed's overnight reverse repo tool does not provide returns at all, but the demand for reverse repos is growing because of the flood of liquidity in the dollar financing market. In addition to the asset purchases by the Federal Reserve and the increase in system reserves caused by the reduction of the US Treasury's account cash balance, the excess liquidity has also been exacerbated by stimulus allocations to state and local governments.