Liquidity and the federal balance sheet
Reading the data…
1. Net Fed liquidity
Fed balance sheet minus the Treasury's cash account (TGA) minus overnight reverse repo: the part of the Fed's balance sheet that sits in the banking system and markets. It tracked equities closely in 2020–2023; the relationship is loose over longer periods, so read it as a flow gauge, not a price target.
2. Bank reserves
Reserves as a share of GDP. When reserves become scarce, repo rates spike (September 2019); the Fed has said it aims to stop balance-sheet runoff while reserves are still "somewhat above ample".
3. Deficit and the interest burden
A running 12-month federal deficit (Monthly Treasury Statement) against nominal GDP, and federal interest payments as a share of federal receipts. Large deficits outside recessions add Treasury supply and can lift the term premium.
Methodology & sources
FRED: WALCL (Fed total assets, $mn, weekly), WTREGEN (TGA, $mn, weekly), RRPONTSYD (overnight reverse repo, $bn, daily; weekly average used), WRESBAL (reserve balances, $mn), SP500, MTSDS133FMS (monthly federal surplus/deficit, $mn), GDP (nominal, SAAR), A091RC1Q027SBEA (federal interest payments, SAAR), FGRECPT (federal current receipts, SAAR), GFDEGDQ188S (federal debt held by the public and intragovernmental, % of GDP).
Net liquidity = WALCL − TGA − RRP, all converted to $bn. The 12-month deficit sums the last 12 monthly statements and divides by the latest quarterly nominal GDP (annualized). FRED's S&P 500 series only covers the last 10 years.