WEEKLY FED BALANCE SHEET REVIEW. FIRST CONTRACTION IN SIXTEEN WEEKS (AND A TINY ONE AT THAT)
. Federal Reserve: "Factors Affecting Reserve Balances", April 25

- Fed's Treasuries holdings: $775.7bn (-$2.6bn)
- Other central banks' Treasuries holdings: $1,228.0bn (-$7.9bn) (*)
- Other central banks' agency securities: $690.1bn (+$10.0bn) (*)
- Mackinlay's Global Dollar Liquidity Measure: $2,693.8bn (-$0.5bn)

(*) Off-balance-sheet items.
agustin_mackinlay@yahoo.com
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Our Global Dollar Liquidity Measure has contracted for the first time in ... sixteen weeks! Central banks, including the Fed, sold Treasury securities rather aggressively during the week. A $10bn purchase of agency securities by one or more foreign central banks was not enough to compensate for this loss. The liquidity contraction, however, is only a tiny one: less than $500 million. (The long-term picture remains very positive for liquidity bulls).

As if mirroring this situation, our Endogenous Liquidity Index barely moved during the week. The rising VIX (until Thursday) put downward pressure on the ELI, but the move was compensated by the Goldman Sachs share price (all-time high) and by slightly lower CDS spreads. High-yield bond spreads and the carry trade factor remained largely unchanged. Will the markets quiet down for a while?