Details emerged from Treasury's refunding meeting this week has been quite surprising and inconsistent. The implication for stonks for the next 4-5 months could be surprising as well.
Treasury declared its TGA target for July 31st at $450Bn, while slowing down T-bill reduction.
Treasury declared its TGA target for July 31st at $450Bn, while slowing down T-bill reduction.
Plugging in the current USG spending model along with EOQ TGA target of $800Bn, I ended up with this:
Not much spending until July when TGA nose-dives from $950Bn to $450Bn in 4 weeks.
Not much spending until July when TGA nose-dives from $950Bn to $450Bn in 4 weeks.
A few things have happened in the past 2 weeks.
1. Tax receipts have been very strong (the economy is almost overheating from payroll data)
2. Stimulus spending has dropped to almost nothing.
3. Treasury's TGA reduction plan will have to change course in July as a result
1. Tax receipts have been very strong (the economy is almost overheating from payroll data)
2. Stimulus spending has dropped to almost nothing.
3. Treasury's TGA reduction plan will have to change course in July as a result
(took me a lot of time this week to recalibrate my spending model with the new tax/spending regime. The deferred tax filing this year added a lot of new twists)
At this rate, the Fed needs to twist very soon, no later than July. Otherwise money market (repo) is going to break.
At this rate, the Fed needs to twist very soon, no later than July. Otherwise money market (repo) is going to break.
Now that we are at the brink of a new season of SICO, how stonks would respond to this new liquidity regime could be quite weird.
Will send out an update tomorrow (May 7th) with a short-term analysis (2 weeks), and a longer-term analysis (into 7/31), as data are finally here.
Will send out an update tomorrow (May 7th) with a short-term analysis (2 weeks), and a longer-term analysis (into 7/31), as data are finally here.
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