Market Overview Analysis by Alfonso Peccatiello covering: . Read Alfonso Peccatiello's latest article on Investing.com
: between now and then, Yellen is likely to drain the Treasury General Account and unleash a wave of almost $1 trillion liquidity on markets and the economy.
Here is a very simple, stylized household balance sheet: bank deposits, stocks, and T-Bills on the asset side and loans or mortgages plus net worth on the liabilities side.Higher rates provide an additional income boost: So, if the private sector is temporarily shielded from higher borrowing costs but enjoying the benefits of higher interest rates and continued fiscal injectionsSuch ‘’creative’’ arguments are generally heard at local tops in market and economic euphoria: soft landing headlines were popular in the second half of 2007, and with 5% 10-year yields in October 2023 we had a CNBC special on why yields were headed to 13%.
As you can see from the chart above, the TGA generally sits around 250-350 USD billions and it occasionally increases towards USD 1 trillion only to be subsequently drained back to its standard size. After the ongoing tax season, Yellen will soon have around USD 1 trillion in the TGA - that's quite high, and hence we should expect a drainage to follow.
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