US Liquidity Tracker

The Federal Reserve's balance sheet is the master dial on how much money exists in the system. When the Fed buys bonds (Quantitative Easing), it creates new money and its balance sheet grows. When it lets bonds expire without replacing them (Quantitative Tightening), money leaves the system and the balance sheet shrinks.

Think of it as a giant faucet. QE turns it on. QT turns it off. Right now the Fed is doing QT — letting about $60 billion in treasuries and $35 billion in mortgage-backed securities roll off every month. That's real money leaving the pool.

What to watch: Is the balance sheet shrinking faster or slower than expected? Any hint that the Fed will slow or stop QT is bullish. Any acceleration is bearish.

This is literally the US government's bank balance at the Fed. When the Treasury collects taxes or sells bonds, money flows from the economy into this account — liquidity goes down. When the Treasury spends (pays contractors, sends checks, funds programs), money flows back out — liquidity goes up.

Think of it as a bucket the government keeps dipping into the pool. The bigger the bucket gets, the less water is left for everyone else.

What to watch: Tax season (April) fills this account up, pulling liquidity from markets. Government spending sprees draw it back down. Debt ceiling standoffs force the Treasury to spend down the TGA, which ironically injects liquidity into markets — one of the weirdest bullish signals in macro.

Every night, money market funds and financial institutions can park their excess cash at the Fed overnight through the Reverse Repo facility. Money sitting in this facility is money that's not in the economy — not buying stocks, not flowing through banks, not doing anything productive. It's just... parked.

Think of it as water voluntarily returning to the reservoir instead of flowing through town. The ON RRP peaked at $2.5 trillion — that was $2.5 trillion of idle cash sitting on the sidelines. It's drained significantly since then, which means that money re-entered the system. That's been one of the major stealth tailwinds for markets.

What to watch: How much is left in the tank. As the ON RRP approaches zero, one of the major sources of "free" liquidity dries up. The financial system will need to find liquidity elsewhere — or the Fed will need to step in.

Since 2008, the Fed has flooded the banking system with trillions in reserves. This excess cash acts as a safety net — banks can weather unexpected storms without scrambling for cash.

The problem: the Fed is slowly draining these reserves through QT. At some point, reserves drop from "ample" to "not enough" and things get ugly fast. The last time this happened — September 2019 — overnight lending rates spiked from 2.4% to over 10% in a single day. The Fed had to create an emergency lending facility on the spot.

What to watch: How do you know when we're getting close to the danger zone? Watch the Standing Repo Facility.

The Fed created the Standing Repo Facility after the 2019 repo crisis specifically as an early warning system. Banks can swap their Treasury bonds for cash here when they're running low on reserves.

The signal is simple: SRF usage at zero = system is fine. SRF usage above zero = banks are getting desperate for cash. Since the SRF's creation, usage has stayed at zero. The day that changes, pay attention.