Friday, June 8, 2012

[Dollar Macro Liquidity +1.5%; Moody's Baa spread 341 bps; bearish]

AM | @GlobalLiquidity

Is it just me? I've been sounding the global liquidity alarm bells for the better part of six months already, and I have yet to find somebody who agrees. Here's the point: the two key measures of our Dollar Macro Liquidity indicator have all but ... collapsed. Take the rate of growth of Fed credit on the asset side of the central bank's balance sheet: +0.86% y-o-y. Admittedly, this is the first balance sheet for the month of June [see]; things can still improve (slightly) from here. But the trend says it all: + 24.08% (October); +22.44% (November); +21.10% (December); +19.77% (January); +17.62% (February); +12.00% (March); +7.74% (April); +4.38% (May); + 0.86% (June).

Some people have a hard time believing these numbers, given all the talk about surging central bank liquidity. So let us look at them from a different angle, namely the liabilty side of the Fed's balance sheet. Well, the St. Louis Fed's monetary base is growing at a whopping ... 0.6% y-o-y rate [see]. So it's even worse. And what about the stock of custody holdings? At +2.10% in June, it is a far cry from the post-Lehman euphoria (+22.4%, December 2008). The key takeaway: this is not only about Europe anymore. Mostly, it is about China making the painful transition from an exporting periphery to a center of growth and innovation. In my view, they are taking all the right steps. But it will be a long journey indeed.

[1] Fed credit: $ 2,830.9 bn (+0.9%); [2] Custody holdings: 2,799.1 bn (+3.5%); [3] Agency Holdings: $ 718,5 (-3.0%); [4] Dollar Macro Liquidity: $ 6,348.6 bn (+1,5%); [5] Market Liquidity Index: -25.5%; [6] Spread Moody's Baa: 340 bps (+68bps).

No comments:

Post a Comment