Barclays said demand for the Fed's reverse repo agreement could reach 750 billion to 800 billion euros a day, and the Fed's reserves could be $4.6 trillion by the end of the year.

Strategist Joseph Abate wrote in the report that there is "a lot of uncertainty" in the estimate of reverse repo usage.

In the second quarter, 75% of the expansion of the Fed's balance sheet was absorbed by banks in the form of new deposits, with the rest flowing into money market funds. Strategists estimate that much of this cash will end up in overnight reverse repos.

Note: the use of the Fed's overnight reverse repo mechanism fell on Friday, with 61 institutions participating, totaling $747.1 billion, down from an all-time high of $756 billion set on June 17.

As of June 16, the Fed's reserves stood at $3.9 trillion, up 24% so far this year.

While the Fed's increase in overnight reverse repos will help reset returns on assets purchased by money funds, it will not eliminate "a short-term imbalance between supply and demand in the market, in which there is too little money to invest in," Abate wrote.

Us Treasuries with maturities of six months or less yield less than 0.05 per cent.