Worst Turn in years

Currently, USD liquidity is nearing critical thresholds, hovering around $6 trillion. As we approach the end of the month, we expect a spike in the ON RRP facility of approximately $175 billion, leading to a liquidity drain similar to the year-end of 2022/2023. Back then, the impact on markets was substantial due to significant liquidity shortages.

However, unlike 2022, the fourth quarter of 2024 is expected to see a more positive liquidity trend as the TGA is being depleted ahead of the debt ceiling suspension. This suggests we may face a sharp quarter-turn, but the year-end turn could be more manageable in USD funding markets.

Chart 1: The worst September liquidity in years