Bottom Line: Net US Dollar liquidity fell sharply this week through Wednesday. Barring any sudden shocks, the average trajectory of Fed liquidity should be tighter for the next several quarters, probably through year-end. That said, it will be volatile as the Treasury catches up on issuance and restores its general account (TGA) balance at the Fed.
Over the last four weeks, the TGA has increased ~60B per week, almost exactly matching the reduction in bank repo at the Fed as commercial banks used cash to pay for Treasuries rather than repo'ing with the Fed. Finally, money market funds saw net redemptions for only the second week in the last eight. |
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