$ETH On December 1st, the Federal Reserve's quantitative tightening ended, and the 'big drainage' that lasted for two and a half years drained the vitality from the financial market—so, has liquidity returned on December 1st?
Unfortunately, there is currently nothing.
Because on December 1st, the U.S. Treasury issued about 200 billion in treasury bonds, and once again took a serious toll, last night the market liquidity tightened again.
The interest rate upper and lower limits of the financial market, SOFR and IORB spread reached 0.22, while the usage of the Federal Reserve's standing repo facility (SRF) reached 26 billion dollars, the second highest level since 2020.
This SRF is the short-term liquidity loan that the Federal Reserve lends to financial institutions, which will appear frequently in the future, similar to our spicy powder MLF, I suggest everyone pay attention.
If December 1st is an 'exception' due to U.S. Treasury issuance, will the Federal Reserve resume liquidity injections afterwards?
Unfortunately, the answer is that there will not be any soon.
Starting from January 2026, the Federal Reserve will launch a 'Reserve Management Purchase' plan, which will directly purchase about $20 billion in Treasury bonds each month, and will also reinvest approximately $20 billion in principal from MBS maturities into Treasury bonds each month.
This may seem like balance sheet expansion, but in reality, it is replacing the 'U.S. Treasury absorption', with the original 'reverse repos' changing from money market funds to the Federal Reserve.
In other words, this round of Federal Reserve balance sheet expansion is completely different from the expansion during the pandemic four years ago and will not cause a flood of redundant liquidity.
The increase in global assets certainly cannot be compared to that during the period of 2023-2024.
As the Bank of Japan gradually raises interest rates, the era of 'free money' globally is coming to an end.
We will eventually realize that the world will gradually enter an era where the level of funds continues to rise.
Powell is leaving, and Hasset is arriving.
The framework of ample liquidity is departing, and the SRF management framework is arriving.
The negative interest rates on the yen are leaving, and the global interest rate hike cycle is not far away.
Are you ready?\u003ct-14/\u003e\u003ct-15/\u003e\u003cc-16/\u003e\u003cc-17/\u003e
