All Eyes on the Treasury

As of February 7th, the Treasury has used up more than 60% of its extraordinary measures - likely even higher by now.

The key question: when will they tap into the liquidity everyone is waiting for?

We expect the TGA drawdown to begin next week, though it will likely be temporary.

Tax season in April will refill the account before another decline begins—until a new debt limit or suspension is agreed upon.

Meanwhile, the Fed shows no signs of halting QT.

Other bullish indicators include the Q4 2024 loan survey.

While demand remained weak, banks anticipate a rise in loan demand for 2025, supported by signs of improvement in the business cycle, such as an uptick in ISM PMI data.

Trump's new tariffs on China had no effect on the dollar, confirming our expectation that a big down move is coming.

While the Fed’s tightening continues, we believe the TGA drawdown could offset these effects, leading to a net positive liquidity injection in the coming weeks.

With so much focus on TGA levels, a frontrun seems likely.

Our Global Liquidity Index increased by $0.566 trillion this week, marking a 0.44% increase.

The 3-month change is showing improvement but still lags behind the 12-month change.

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