WEEKLY FED BALANCE SHEET REVIEW. A STRONG START IN APRIL
. Federal Reserve: "Factors Affecting Reserve Balances", April 4

- Fed's Treasuries holdings: $776.5bn (+$0.9bn)
- Other central banks' Treasuries holdings: $1,220.4bn (+$9.5bn) (*)
- Other central banks' agency securities: $672.4bn (+$3.5bn) (*)
- Mackinlay's Global Dollar Liquidity Measure: $2,669.2bn (+$13.9bn)

(*) Off-balance-sheet items.
agustin_mackinlay@yahoo.com
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The first weekly Fed balance sheet for the new month contains goods news for liquidity bulls. Our Global Dollar Liquidity Measure is growing at a 13.2% rate, the strongest showing in 26 months. Following hints by Fed officials and market participants about "the liquidity that the market itself creates", I find myself concocting an Index of Intrinsic Liquidity designed to capture the impact of financial innovation on the supply of loanable resources.

The index combines measures of bond spreads (soon to be replaced by CDS spreads), market volatility, the carry trade (as measured by the spread between short rates in Japan and the US), and ... the Goldman Sachs share price (as a proxy for financial innovation). Preliminary results show that "intrinsic liquidity", despite sharp setbacks in February and March, is still growing at a healthy rate. All in all, not a bad picture for risky assets.