USD Liquidity Watch: Stealth QE out of the 2024 gates?

USD liquidity is likely to come flying out the gates of 2024 due to a series of technicalities. We have gone from QE, to QT, to QB to QE-light. Position accordingly!

Happy New Year to all of you!

Based on MASSIVE public demand, I release an article with more details on the tsunami of USD liquidity arriving through Q1.

There will be plenty of late Christmas presents and New Year gifts from the US fiscal- and monetary authorities to start the year with.

USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities. We are set for a material rally (or a blow off top) in Q1.

Let’s have a look at the details.

The ON RRP Facility
The ON RRP facility ended the year around $1trn in size, but the issuance calendar looks compelling for a continued drawdown of the facility. The issuance will be heavy in January and March, and it remains consistent with a depletion pace of above $300bn in the ON RRP facility on a monthly basis, with the biggest draw to be expected in January.

When a USD is withdrawn from the ON RRP facility to buy a T-bill, it automatically creates a new Dollar in deposit in the banking system, unless it is stored on the Treasury General Account (TGA).

Chart 1: The ON RRP facility is driven by issuance