The sudden drop in tax collection data from a red hot September are ominous. The Fed and the markets could be caught flat-footed.
It was another week of “risk-off” but the pressures of the mid month Treasury settlement are now behind us. The respite may be brief however. The market got less support from the Fed in this round of Treasury settlements, but at the end of the month it will get none at all.
The Federal Government’s tax collections have dropped sharply in the past few weeks. Is the US economy falling off a cliff?
Treasury demand indicators including Primary Dealer Accounts, Foreign Central Banks (FCBs), US Commercial Banks, and US bond funds were mixed in the past week. The only real change and notable item was that foreign central banks were not buyers at the turn of the month Treasury auctions. That’s important.
There’s still plenty of “risk-off” liquidity around to fuel demand for short term Treasury paper, but the “risk-on” liquidity that had supported demand for longer term risk assets is dwindling and a supply problem will only grow in the months ahead. Here’s how it all shakes out.
September was a blockbuster month for Federal tax collections. The US Treasury continued to pile up cash. Here’s what that means.
The macroliquidity indicator continues to flatten as the Fed stays the course of reducing outright securities purchases. Several component indicators are on the cusp of breaking the long term uptrends in force since 2009 or 2010.
Treasury supply was light this week with just the weekly bills. There was a paydown of $14 billion on Thursday, which helped to stabilize the market after it was hit with heavy supply at the end of September.
The great economic philosopher, Professor Lawrence Y. Berra, said, “In theory there’s no difference between theory and practice but in practice there is.” That being said, I have a theory about what’s driving the new dollar bull market and why that could “in theory” be bullish for US stocks and bonds, at least in the…
The US Treasury continued the dramatic increase in its cash balances in the past week.