Could Money Market Liquidity Run Dry By September?

Last FOMC Meeting Was A Disastrous Muddle

Debt may be bad per se, but too much debt relative to liquidity is a disaster in modern economies, because debts need to be rolled-over and liquidity is the vehicle. Put another way, financial markets serve as a vast refinancing mechanism, and less so in their textbook role as sources of new capital. This explains why we emphasize balance sheet quantities, not interest rates.

Looking ahead, a major bogey investors must face is the upcoming debt maturity wall. This refers to the need to roll-over debts termed out during the COVID emergency some 5-years ago, when interest rates collapsed to near zero. These demands peak in 2027, but they begin to bite from around mid-2025. Evidence how this ‘terming-out’ has affected the average maturity of existing World debt and the likely approaching plunge, as old debts come due.