NEW YORK (Reuters) -A key Federal Reserve facility that takes in cash from money market funds and others saw inflows drop sharply on Monday.

The U.S. central bank's reverse repo facility took in $327.1 billion, down $80.2 billion from Friday, marking the lowest level of inflows since the facility took in $293 billion on May 19, 2021.

The Fed's reverse repo facility exists to put a floor underneath short-term rates, taking in cash from eligible firms in loans collateralized with Treasuries held by the central bank. Inflows have been contracting for some time as the Fed withdraws liquidity from the financial system by allowing its holdings of bonds to shrink.

Monday is the deadline for most U.S. tax returns and a key settlement date for Treasury debt auctions, which can influence activity at the reverse repo facility. Scott Skyrm, executive vice president at money market trading firm Curvature Securities, says money is coming out of reverse repos to deal with financing the Treasury's debt issuance.