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Category: 1 – Liquidity Trader- Macro Liquidity
How Fed and Treasury policy, Primary Dealers, real time Federal tax collections, foreign central banks, US banking system, and other factors that affect market liquidity, interact to drive the financial markets. Focus on trend direction of US bonds and stocks. Resulting market strategy and tactical ideas. 4-5 in depth reports each month. Click here to subscribe. 90 day risk free trial!
This report provides an in-depth analysis of the U.S. Treasury’s supply outlook from February to April 2025, featuring the issuance schedule with estimated net new supply for each issue, as well as the impact of T-bill paydowns, the role of the Fed’s RRP facility, and debt ceiling uncertainties, including a forecast date when the US Treasury will run out of cash.
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Withholding tax collections entered a strong rebound phase in early February after their typical cyclical trough in late January. Strong employee earnings inflation accounted for 2/3 of the gain. Meanwhile, corporate tax collections continue to reflect strong profitability and excise tax collections were also strong.
Liquidity remains plentiful, sustaining bullish market sentiment for now. Key risks include a breakdown in repo growth, foreign investor withdrawal, and Treasury policy for debt ceiling management. A reversal in any of these areas could signal the start of a major market correction.
The next few months will be critical in determining whether liquidity continues to sustain market momentum or if cracks start to emerge. Here are the keys to the outlook.
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This update builds upon the analysis provided in the Liquidity Trader Macro Liquidity Report dated January 24, 2025 incorporating data released by the Federal Reserve on January 24. The original report highlighted the precarious balance between liquidity drivers and systemic risks. This update refines those insights with the most recent data on the Stock Price to Bank Deposit Ratio, Delivery Versus Payment (DVP) Repo trends, and the Federal Reserve’s Reverse Repo Program (RRP) slush fund.
This update aligns with the themes of liquidity-driven market risks and shows emerging sentiment and monetary shifts. These shifts suggest that change is likely in the trajectory of equity markets in the months ahead.
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The current market environment reflects a precarious balance between liquidity expansion and underlying systemic risks. Despite the Federal Reserve’s continued quantitative tightening (QT), private money creation through lending and repo markets has kept liquidity flowing, pushing stock prices to historically stretched levels. However, the new political approach to the re-imposition of the federal debt ceiling introduces uncertainties.
This report covers the data and shows you the trends to watch in order to prepare for what’s ahead. A vigilant approach to liquidity signals and fiscal developments will be critical in adapting to potential shifts in market conditions. I will continue to provide that vigilance for you in the months ahead.
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Primary Dealer positions and financing indicate elevated risk, but debt ceiling dynamics, and resulting market liquidity conditions should delay the next bear market until later this year. Non-subscribers, click here for access.
Discover how macro liquidity trends are shaping the financial markets in 2025. From surging bank deposits to the implications of the Federal Reserve’s QT measures, this report uncovers the forces driving stock and bond markets today. Explore the pivotal role of repo lending, Treasury actions, and money market fund balances in sustaining market momentum—or signaling potential shifts ahead.
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Federal withholding tax collections were strong in December. Ongoing strong revenue growth could reduce Treasury supply to give the markets xxxxxx xxxxxxxxx xxxxxxxx. Non-subscribers, click here for the rest of the story.
The debt ceiling is the wild card. As long as it remains in place pending a deal between Congress and the Trump administration, Treasury supply will be reduced. Normally the supply reduction is achieved via T-bill paydowns, with that cash going back to the original holders of the bills, including major investors, dealers, and banks. Strong revenue growth could mean months of T-bill paydowns lasting through May and June from the annual March- April tax bulge.
The bottom line from the tax revenue perspective is that it will continue to xxxx xxxxxxx xxxxxx market trends, potentially in both stocks and bonds for the duration xxxxxxxxxxxx xxxxxxxxxx xxxxxxxxxx in place. Once xxxxxxxx xxxxxxxx xxxxxx, then the Treasury supply problem will return with a vengeance. Until then, the markets remain in La La Land, where all appears well.
Expanding Market Liquidity – Despite the Federal Reserve’s ongoing Quantitative Tightening (QT), liquidity within the financial system continues to grow. This expansion is driven by private lending, repo markets, and government spending. This shows the market’s ability to generate liquidity despite the Fed’s shrinking its balance sheet. Non-subscribers can click here for access to the full analysis.
Stock Market Resilience – Stock prices remain elevated at trend extremes, reflecting bullish sentiment and plentiful liquidity. While markets are extended, no clear sell signals have emerged yet. However, the potential for a bear market to begin is high. We remain on the alert for signs that it is imminent. Non-subscribers can click here for access to the full analysis.
Role of Repo Markets – Delivery vs. Payment (DVP) repos have been central to market speculation and liquidity growth. Repo has funded the Federal Debt, increasing the money available for asset speculation. Rising repo activity correlates strongly with stock price increases. They’ve reached an apparent trend extreme. This report looks for signs of reversal.Non-subscribers can click here for access to the full analysis.
Diminishing RRP Liquidity – The Fed’s Reverse Repo (RRP) facility, once a primary source of liquidity, has been drawn down to a nominal level. As the RRP pool shrinks, the market’s reliance on self-generated liquidity through repos and credit creation increases. That means increasing leverage with increasing fragility and vulnerability to rapid, uncontrolled unwinding. This report examines signs that that may be imminent. Non-subscribers can click here for access to the full analysis.
Foreign Central Bank Influence –Foreign central banks play a pivotal role in liquidity flows, with their Federal Reserve custodial holding and foreign RRP activity correlating with market movements. There are warning signs in this data, but no outright sell signals yet. Non-subscribers can click here for access to the full analysis.
Treasury and Bond Market Outlook – The Treasury’s cash balance remains elevated, supporting short-term liquidity through T-bill paydowns. However, rising bond yields and continued debt issuance should continue to apply pressure to fixed-income markets, with eventual contagion into stocks and other assets. These reports looks at the signs. Non-subscribers can click here for access to the full analysis.
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The latest Macro Liquidity Report reveals the trends, risks, and opportunities reshaping the financial markets as we head into 2025. With unprecedented liquidity levels and historic market valuations, the interplay between fiscal policy, central bank strategies, and global money flows is creating powerful dynamics that every investor needs to understand. Subscribers, click here to download the report.
Liquidity Trends That Defy Expectations Why are stock prices still climbing? What could it mean for market sentiment ahead? 🔗 Click here for full analysis.
The Debt Ceiling Wild Card How will the return of the U.S. debt ceiling in January influence liquidity flows and market direction? 🔗 Click here for full analysis.
The Repo Market’s Critical Role Discover the engine driving today’s markets and why its movements are pivotal. 🔗 Click here for full analysis.
Money Market and Foreign Liquidity Signals Explore how institutional cash balances and foreign deposit trends are shaping the outlook for U.S. stocks and bonds. 🔗 Click here for full analysis.
The Macro Liquidity Report delivers exclusive insights backed by real-time data and expert analysis. Whether you’re managing risk or seeking opportunities, this report helps you stay ahead of market movements.
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📈 Special Offer Act now and enjoy a risk-free 90-day trial to Lee Adler’s Liquidity Trader! Know what’s happening before the Street does—start making decisions based on real-time reality.
Want the full picture?Subscribe now to gain access to the complete report and uncover the critical insights that could transform your investment strategy.
📈 Subscribe Today and start making informed decisions in an ever-changing market.
Lee Adler
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