We normally try not to get caught up too much in the weeds of daily and weekly comments on data, but this is an important fortnight. This latest week saw the first Fed H4.1 data release since the ‘big’ tax filing week starting April 15th: next week will see the Quarterly Refunding Announcement (QRA) detail how much liquidity the US Treasury will grab from the markets, and across what maturities. We will comment on these developments when they occur.
Much as feared, the tax gathering period has drained precious liquidity from markets and created an air pocket for financial asset prices. Markets are stalling. How far they fall will depend on how quickly liquidity comes back. The chart below details the growth rate of US Dollar Liquidity. This comprises US domestic components plus the dollar reserves of foreign Central Banks, which, in turn, is used as a further feed-stock into Global Liquidity. So far, not good…