Alternative liquidity window

While the #federalreserve has offically started its balance sheet reduction ln June 1st, with the objective of decreasing it by $3Tn over the next 3 years, it’s currently providing liquidity to the system in the amount of $2Tn through its reverse #repo facility. As you can see in the chart below, it’s currently 5X the prior maximum, and it keeps growing. While the headlines focus on tightening and the end of easy money, the fed is using a smaller window to keep providing liquidity to the system and prevent a potential collapse of the short term fixed income markets.

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Source: Bianco Research LLC