Tracks the flow of capital available to the financial system.
Measures the effective liquidity provided by the Federal Reserve, adjusting for the Treasury General Account and Reverse Repo facilities.
Net Liquidity = Fed Balance Sheet - RRP - TGA. This formula approximates the actual reserves available to banks and markets.
Rising net liquidity often correlates with asset price support.
Stable liquidity implies neutral monetary impact on asset prices.
Contracting liquidity can act as a headwind for risk assets.
The 2020-2021 market expansion tracked closely with unprecedented liquidity injections, while 2022's correction mirrored liquidity withdrawal.
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