In The Next Several Weeks, We Could See $300 Billion Of Liquidity Leaving The System t.co/mNLMdOmokg
— zerohedge (@zerohedge) April 9, 2024
In the next several weeks, we could see about $300 billion of liquidity leaving the system. This is in large part due to the tax deadline on April 15 (see “$265 Billion In Capital Gains Tax Selling: Morgan Stanley Warns Momentum Mauling Is Coming, Thanks To The IRS”). We should expect large tax revenues, in part because taxpayers have significant capital gains from the 2023 equity bull run. Treasury bill issuance will flip negative in Q2 to the tune of about $150 billion as the government runs a budget surplus for a cup of coffee. Add to that the $95 billion in monthly QT (quantitative tightening, Fed balance sheet reduction) and we could see $250 billion of liquidity drain. On top of that, this month about $75 billion of the emergency bank lending facility (BTFP loans) expired and since the facility is now closed, they may not get renewed. This causes another contraction in bank reserves.