The Treasury supply issue is still favorable for most of June. The Treasury has already resumed paying down T-bills thanks to a huge cash balance and the prospect of a big wave of estimated tax collections on June 15. Non-subscribers, click here for access.
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I now estimate that paydowns should rebuild the Fed’s RRP facility to xxxxxxxxxxxxxxxx. That should be enough to last until xxxxxxxxxxxxxxxx. It doesn’t guarantee bullish markets until then, but it’s potential cash flow that will offset ongoing QT until it doesn’t. That should be xxxxxxxxxxxxxxxx at the latest. So enjoy the party while it lasts. Non-subscribers, click here for access.
Meanwhile the stock market had looked historically overbought versus the level of bank deposits in recent weeks. But it has now blown through that record extreme into a supernova of bullishness. When that finally turns, it should mark the end of this bull run. But we’re not there yet, and there’s no reason to try and anticipate the turn by selling too early. The market will tell us. Meanwhile, I would let xxxxxxxxxxxxx xxxxxxxxxxx. Non-subscribers, click here for access.
However, the buildup of divergences between liquidity indicators and the direction of asset prices means that when the market finally does give it up, we should believe it. It will be time to sell and sell short, not just wait out the next correction. Non-subscribers, click here for access.
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