Welcome to another edition of our USD Liquidity Watch series. The investment bank consensus is now (finally) converging towards our long-held view that the US Treasury is effectively behind the liquidity steering wheels at the Fed.

Lorie Logan of the FOMC said on Friday that “… given the rapid decline of the ON RRP, I think it’s appropriate to consider the parameters that will guide a decision to slow the runoff of our assets. In my view, we should slow the pace of runoff as ON RRP balances approach a low level.” effectively handing over the responsibility of the timing of the tapering of QT to Janet Yellen and her link at the US Treasury. This makes a QT tapering the base case for the March meeting and/or potentially with strong hints already at the January meeting.

Find the details on the liquidity path ahead and how we intend on trading it here.

Chart 1: The Fed will end QT when the ON RRP is close to depletion