Courtesy of Lee Adler of the Wall Street Examiner
The composite liquidity indicator had a tiny downtick week as the Fed’s securities purchases were on hold, while FCB and bank purchases downticked and bank reserve deposits at the Fed rose. Those changes were enough to offset gains in indicators with less weight in the composite.
The Fed’s buying of MBS will remain a bullish influence at least until year end. Bank trading and bank net Treasury purchases are in currently bullish patterns. Net bank inflows and reserve deposits at the Fed are in neutral patterns, while FCB purchases are bearish. Fed cash injections to Primary Dealers should keep the indicator in at least a mild uptrend for the rest of this year. That may be enough to keep Treasuries at very low yields and it could also give stocks a boost.
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