Steno Signals #50 – Singing Hallelujah while sleeping at the wheel!
Biden and McCarthy have allegedly agreed on the principles for a 2-year debt ceiling deal, which could prevent the US government from a forced shutdown early next week. We now know that USD liquidity will dwindle in coming months as 1) The TGA cannot drop further, 2) QT is still running and 3) the FDIC may repay further emergency loans on behalf of banks
The “fuel” from a depletion of the TGA is hence no longer a thing as of this week, which is likely going to test risk appetite in markets and lead to further tailwinds for the USD.
Chart 1: The TGA is practically empty – time to rebuild
A debt ceiling deal is not necessarily good news for equities on an equal-weighted index level.
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