Can someone explain to me what's happening with liquidity and if this is bullish or bearish?
“The origins of this year’s risk rally lie in obscure technicals driving central bank liquidity,” King said in the report. “At this point we think most of the boost to reserves is done.
According to King, the $1 trillion increase in reserves helps resolve the disconnect: It’s worth about a 10% boost for stocks, 50 basis points of tightening in investment-grade credit spreads and 200 basis points for high yield spreads
There have been four notable developments that account for the surge
In the US, declines in usage of the Fed’s overnight reverse repurchase agreement facility and money held in the Treasury’s general account have pushed cash into the banking system
European governments have similarly withdrawn hundreds of billions of euro deposits from their accounts at the ECB since August, bolstering liquidity.
In Japan, reserves have risen by about $200 billion as a result of the central bank’s yield-curve control program
while in China, the central bank’s ongoing liquidity operations amounted to about $400 billion in December alone, King said.
https://www.bnnbloomberg.ca/global-liquidity-drain-is-coming-for-markets-citi-s-king-says-1.1883260#
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