US FED / TREASURY LIQUIDITY — WEEKLY MEMO
Week Ending 2026-05-22
Balance-sheet runoff and hawkish minutes flipped URLI negative despite a further TGA drawdown.
URLI Score
-23.50
Mild liquidity drain
Net Liquidity
-$5.7B
Small drain / near neutral
Bank Reserves
-$10.7B
Reserve drain
TGA Change
-$25.4B
Treasury cash injection
RRP Change
+$16.3B
Cash parked at the Fed
Fed Regime
Hold with hike risk
3.50%-3.75%
Treasury Outlook
TGA rebuild expected
Forward liquidity risk
Market Bias
RISK OFF
Liquidity drag caps risk appetite
Executive Conclusion
Supportive
- TGA fell another -$25.4B, still injecting cash.
- Funding markets stayed calm with no stress shock.
Restrictive
- Fed total assets fell -$14.9B and bank reserves slipped -$10.7B.
- RRP rose +$16.3B, parking cash back at the Fed.
- FOMC minutes shifted the rate path toward hike risk.
- USD and yields rose together, a restrictive combination.
Main Warning
- Hike-risk repricing plus the coming TGA rebuild made the liquidity backdrop fragile.
NEGATIVE URLI -23.50 — Mild liquidity drain.
What Changed This Week
| Item | Previous | Latest | Change | Impact |
|---|---|---|---|---|
| Fed total assets | $6,728.5B | $6,713.6B | -$14.9B (-0.2%) | NEGATIVE |
| Bank reserves | $3,117.4B | $3,106.7B | -$10.7B (-0.3%) | NEGATIVE |
| TGA | $807.4B | $782.0B | -$25.4B (-3.2%) | POSITIVE |
| RRP | $326.3B | $342.6B | +$16.3B (+5.0%) | NEGATIVE |
| Fed rate path | — | hold with hike risk | 3.50%-3.75% | NEGATIVE |
| Dollar / yields | — | USD and yields both spiking | NEGATIVE |
Previous week: 2026-05-15 (H.4.1 weekly levels).
Net Liquidity Calculation
Net Liquidity Change = Fed Balance Sheet Change - TGA Change - RRP Change
| Component | Weekly Change | Effect | Notes |
|---|---|---|---|
| Fed balance sheet | -$14.9B | NEGATIVE | Balance-sheet growth adds liquidity. |
| TGA | -$25.4B | POSITIVE | TGA up pulls cash into Treasury; TGA down injects it. |
| RRP | +$16.3B | NEGATIVE | RRP up parks cash at the Fed; RRP down releases it. |
| Net liquidity | -$5.7B | SMALL DRAIN / NEAR NEUTRAL | Sum of the three flows above. |
URLI — US Risk Liquidity Index
URLI = 0.35 x Net Liquidity + 0.20 x Bank Reserves + 0.15 x Fed Rate Path + 0.10 x Treasury Outlook + 0.10 x Funding Stress + 0.10 x Dollar/Yield Pressure
| Component | Weight | Score | Contribution |
|---|---|---|---|
| Net Liquidity | 35% | +0 | +0.00 |
| Bank Reserves | 20% | -30 | -6.00 |
| Fed Rate Path | 15% | -50 | -7.50 |
| Treasury Outlook | 10% | -50 | -5.00 |
| Funding Stress | 10% | +20 | +2.00 |
| Dollar / Yield Pressure | 10% | -70 | -7.00 |
| Metric | Value |
|---|---|
| Weekly URLI | -23.50 |
| 4-week moving average | N/A — insufficient history |
| 13-week moving average | N/A — insufficient history |
Observed URLI history
| Week | URLI | Net Liquidity | Reserves | TGA | RRP | Read |
|---|---|---|---|---|---|---|
| 2026-05-15 | +31.25 | +$70.7B | +$65.9B | -$55.3B | +$3.7B | POSITIVE |
| 2026-05-22 | -23.50 | -$5.7B | -$10.7B | -$25.4B | +$16.3B | MILD LIQUIDITY DRAIN |
| 2026-05-29 | -41.50 | -$28.2B | -$39.7B | +$60.7B | -$41.7B | NEGATIVE |
| 2026-06-05 | -33.50 | -$20.9B | -$21.4B | +$3.1B | +$24.9B | NEGATIVE |
| 2026-06-12 | +29.75 | +$67.0B | +$65.8B | -$44.6B | -$8.5B | POSITIVE |
| 2026-06-19 | -66.50 | -$162.7B | -$175.1B | +$155.4B | +$18.3B | NEGATIVE |
Observed URLI history covers completed weekly runs. Historical percentile ranking uses URLI-Core: the four data-derived components (Net Liquidity, Bank Reserves, Funding Stress, Dollar/Yield Pressure), representing 75% of URLI weight, ranked against frozen weekly FRED history since 2020 and shown in the distribution gauge above. The two policy-judgment components and 13-week live average are outside this percentile lens.
Forward View
Projected URLI — 2026-05-29 estimate
| Item | Estimate | Bias |
|---|---|---|
| Projected URLI point | TBD | LEANING LIQUIDITY DRAIN |
| Backtested URLI range | -25 to -40 | RANGE |
Model track record: last 5 completed projections hit 4/5; mean absolute URLI error 28.40.
Assumptions
- TGA rebuild pressure expected to continue into late May.
- SOMA purchases provide only partial technical offset.
Projection is a model-derived scenario with a measured historical error band, not an observed URLI value. It is replaced by actual H.4.1 / TGA / RRP data in the next weekly run.
Alerts & Warnings
| Alert | Status | Notes |
|---|---|---|
| Major injection / drain | NEUTRAL | Net liquidity -5.7B; no breach of the +/-$100B threshold. |
| Reserve shock | NEGATIVE | Bank reserves -10.7B; inside the +/-$75B shock band. |
| TGA rebuild risk | WATCH | Treasury cash-balance guidance kept the TGA rebuild toward $900B by end-June as the dominant forward drain risk. |
| RRP shock | NEUTRAL | RRP +16.3B; below the $50B shock threshold. |
| Fed rate path | NEGATIVE | May 20 FOMC minutes showed market-implied expectations of little change this year, with options pricing assigning meaningful probability to a hike by Q1 2027. |
| Funding stress | POSITIVE | Funding markets stayed calm; no emergency facility usage appeared in H.4.1. |
| Historical significance | NEGATIVE | URLI-Core (4 data components, 75% weight) = -11.00 ranks in the 36th percentile of weeks since 2020 (N=337). |
Market Transmission
| Asset | Bias | Reason |
|---|---|---|
| SPX / QQQ | HEADWIND | Mild liquidity drain; index-level liquidity does not support multiple expansion. |
| Small caps / breadth | NEGATIVE | Rate-sensitive; needs reserve support and lower yields. |
| BTC / ETH | HEADWIND | Crypto tracks net liquidity; this week's flow was -$5.7B. |
| High-beta alts | WATCH | Need both a positive URLI trend and BTC leadership to outperform. |
NEGATIVE Liquidity drag caps risk appetite.
Bull / Base / Bear Scenarios
| Scenario | Liquidity Setup | Market Impact | Confirms / Invalidates |
|---|---|---|---|
| BULL | TGA drawdown resumes; SOMA support continues; yields cool. | Risk assets bid. | Confirms: net liquidity > +$50B. Invalidates: TGA rebuild accelerates. |
| BASE | Flat net liquidity; Treasury supply offsets SOMA. | Choppy, range-bound. | Confirms: stable reserves, calm SOFR. Invalidates: auction stress or USD breakout. |
| BEAR | TGA rebuild + bill supply + higher yields. | Risk-off. | Confirms: TGA spikes with rising yields. Invalidates: TGA drawdown and falling yields. |
Sources & Data Definitions
| Field | Source | Type |
|---|---|---|
| Balance sheet / reserves / RRP / TGA | Federal Reserve H.4.1 | Official |
| Verification series | FRED WALCL / WRBWFRBL / WDTGAL / WLRRAL | Official |
| Fed policy / rate path | FOMC statement & minutes | Official |
| Treasury outlook | Quarterly Refunding Statement | Official |
| Funding stress score | FRED SOFR / IORB — 5-business-day avg SOFR−IORB spread (bps) | Official |
| Dollar/yield score | FRED DTWEXBGS / DGS10 — weekly Δ broad dollar (%) × Δ 10Y yield (bps) | Official |
| Metric | Definition |
|---|---|
| Fed balance sheet | H.4.1 Total assets, weekly point-in-time level. |
| Bank reserves | H.4.1 Table 5 'Other deposits held by depository institutions' (weekly reserve balances). |
| TGA | U.S. Treasury, General Account. TGA down is liquidity positive. |
| RRP | Reverse repurchase agreements. RRP up parks cash at the Fed. |
| Basis | Latest week 2026-05-22; previous week 2026-05-15; H.4.1 levels in $M, displayed in $B. |