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Last Update: 20/02/2023 | |||
== | == Current data and trends:== | ||
=== FED balance sheet=== | |||
=== Bank Reserves === | *As of Fabruary 17, 2023 the balance stands at $8.384 Trillions, it has declined $581 B from $8.965 Trillion in April 2022. Still a small 6.48% decline. <ref>https://www.federalreserve.gov/releases/h41/current/h41.htm</ref><ref>https://fred.stlouisfed.org/series/WALCL</ref> | ||
*QT is expected to continue in the coming months, with no pause expected, contrary to rate hikes. With a reduction of $60 B per month in treasuries and $35 in MBS. However, the FED has already been behind schedule, treasuries are running 8% ($33B) behind schedule, and MBSs 59% ($120B) behind schedule. <ref>https://twitter.com/DiMartinoBooth/status/1626365171688955904</ref> | |||
===Bank Reserves=== | |||
The correlation between the stock market and bank reserves has been closely follow since it suggests the sock market follows the movement of reserves. | The correlation between the stock market and bank reserves has been closely follow since it suggests the sock market follows the movement of reserves. | ||
* As an effect of QT, Bank reserves are also declining, they stand at 3.1 Trillions, it has declined$ trillion since November 2021, a 25% decline, | * As an effect of QT, Bank reserves are also declining, they stand at 3.1 Trillions, it has declined$ trillion since November 2021, a 25% decline, | ||
* It has been stable the last 3 months at $3 trillions, which could explain some of the financial easing that we saw in January 2023 <ref>https://fred.stlouisfed.org/series/TOTRESNS</ref> | *It has been stable the last 3 months at $3 trillions, which could explain some of the financial easing that we saw in January 2023 <ref>https://fred.stlouisfed.org/series/TOTRESNS</ref> | ||
* Bank reserves are still above the pre-pandemic level | *Bank reserves are still above the pre-pandemic level | ||
=== Reverse Repo === | ===Reverse Repo=== | ||
The Fed’s overnight repo and reverse repo facility (ON RP/RRP) allows MMFs to borrow from or lend to the Fed, using government securities as collateral and agreeing to buy or sell back those securities at agreed rates on an overnight basis. They enjoy practically zero counterparty risk and use top quality government securities as collateral at remunerative rates.<ref>https://www.atlanticcouncil.org/blogs/econographics/fed-reverse-repos-hit-a-new-record-an-unhealthy-development/#:~:text=The%20Fed's%20overnight%20repo%20and,rates%2C%20on%20an%20overnight%20basis.</ref> | The Fed’s overnight repo and reverse repo facility (ON RP/RRP) allows MMFs to borrow from or lend to the Fed, using government securities as collateral and agreeing to buy or sell back those securities at agreed rates on an overnight basis. They enjoy practically zero counterparty risk and use top quality government securities as collateral at remunerative rates.<ref>https://www.atlanticcouncil.org/blogs/econographics/fed-reverse-repos-hit-a-new-record-an-unhealthy-development/#:~:text=The%20Fed's%20overnight%20repo%20and,rates%2C%20on%20an%20overnight%20basis.</ref> | ||
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Its important to monitor it, because if the FED decided to lower the interest rate it pays, this could cause the reverse repo to drain since investors could decide to look for other assets for return. This could inject a lot of liquidity to bank reserves and markets. <ref>https://www.reuters.com/markets/us/sooner-or-later-fed-may-need-technical-tweaks-rate-control-toolkit-2023-02-01/</ref> | Its important to monitor it, because if the FED decided to lower the interest rate it pays, this could cause the reverse repo to drain since investors could decide to look for other assets for return. This could inject a lot of liquidity to bank reserves and markets. <ref>https://www.reuters.com/markets/us/sooner-or-later-fed-may-need-technical-tweaks-rate-control-toolkit-2023-02-01/</ref> | ||
* The reserve repo has been stable at about a trillion dollars since last year. <ref>https://www.newyorkfed.org/markets/desk-operations/reverse-repo</ref> | *The reserve repo has been stable at about a trillion dollars since last year. <ref>https://www.newyorkfed.org/markets/desk-operations/reverse-repo</ref> | ||
* Recently, has been drained by about 200 billion, this could help explain the stabilization of bank reserves and the easing of financial conditions in recent months. | *Recently, has been drained by about 200 billion, this could help explain the stabilization of bank reserves and the easing of financial conditions in recent months. | ||
=== Treasury TGA === | ===Treasury TGA === | ||
The Treasury General Account (TGA) is an account held by the U.S. Department of the Treasury at the Federal Reserve Bank, into which all federal receipts are deposited and from which all federal payments are made. The TGA is essentially the checking account of the U.S. government, and it serves as a key tool for managing the government's daily cash flows. | The Treasury General Account (TGA) is an account held by the U.S. Department of the Treasury at the Federal Reserve Bank, into which all federal receipts are deposited and from which all federal payments are made. The TGA is essentially the checking account of the U.S. government, and it serves as a key tool for managing the government's daily cash flows. | ||
The TGA balance can fluctuate significantly over time, depending on a range of factors, such as the timing of tax collections and government spending. In recent years, the TGA has received increased attention as a result of debates around the federal debt ceiling, which can impact the government's ability to borrow funds and thus its cash balances in the TGA. | The TGA balance can fluctuate significantly over time, depending on a range of factors, such as the timing of tax collections and government spending. In recent years, the TGA has received increased attention as a result of debates around the federal debt ceiling, which can impact the government's ability to borrow funds and thus its cash balances in the TGA. | ||
* | * | ||
===M2=== | |||
=== | ===Bank Deposits=== | ||
== | ==Assestment:== | ||
== | ==References== | ||
<references /> | |||