US FED / TREASURY LIQUIDITY — WEEKLY MEMO
Week Ending 2026-06-05
Mild liquidity drain: reserves fell and RRP absorbed cash even as the Fed balance sheet ticked up.
URLI Score
-33.50
Mild liquidity drain
Net Liquidity
-$20.9B
Meaningful drain
Bank Reserves
-$21.4B
Reserve drain
TGA Change
+$3.1B
Cash pulled into Treasury
RRP Change
+$24.9B
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
- Fed total assets rose +$7.1B on SOMA Treasury purchases.
- TGA was nearly flat (+$3.1B) after the prior week's sharp rebuild.
- Funding markets remain calm; no emergency stress visible.
Restrictive
- Bank reserves fell another -$21.4B.
- RRP rose +$24.9B, parking cash back at the Fed.
- Rate path stays restrictive with hike risk priced for 2027.
- Front-end and 10Y yields rose versus May 27.
Main Warning
- TGA rebuild remains the medium-term risk; next-week Treasury settlements may offset SOMA support.
NEGATIVE URLI -33.50 — Mild liquidity drain.
What Changed This Week
| Item | Previous | Latest | Change | Impact |
|---|---|---|---|---|
| Fed total assets | $6,704.4B | $6,711.5B | +$7.1B (+0.1%) | POSITIVE |
| Bank reserves | $3,067.0B | $3,045.7B | -$21.4B (-0.7%) | NEGATIVE |
| TGA | $842.7B | $845.7B | +$3.1B (+0.4%) | NEGATIVE |
| RRP | $300.9B | $325.8B | +$24.9B (+8.3%) | NEGATIVE |
| Fed rate path | — | hold with hike risk | 3.50%-3.75% | NEGATIVE |
| Dollar / yields | — | USD or yields up | Broad USD 118.88 (FRED DTWEXBGS, 2026-05-29) | NEGATIVE |
Previous week: 2026-05-29 (H.4.1 weekly levels).
Fed Balance Sheet Detail
| Indicator | Latest | Weekly Change | Read |
|---|---|---|---|
| Fed total assets | $6,711.5B | +$7.1B (+0.1%) | POSITIVE |
| Securities held outright | $6,436.4B | +$7.4B (+0.1%) | POSITIVE |
| Treasury securities | $4,469.3B | +$7.4B (+0.2%) | POSITIVE |
| Bank reserves | $3,045.7B | -$21.4B (-0.7%) | NEGATIVE |
| Discount window | $6.1B | -$0.3B (-4.4%) | POSITIVE |
H.4.1 Table 5 weekly levels in millions of dollars, from the Federal Reserve H.4.1 release dated June 4, 2026 for Wednesday June 3, 2026. Bank reserves use Table 5 'Other deposits held by depository institutions'. Verified against FRED WALCL / WRBWFRBL / WDTGAL / WLRRAL.
Net Liquidity Calculation
Net Liquidity Change = Fed Balance Sheet Change - TGA Change - RRP Change
| Component | Weekly Change | Effect | Notes |
|---|---|---|---|
| Fed balance sheet | +$7.1B | POSITIVE | Balance-sheet growth adds liquidity. |
| TGA | +$3.1B | NEGATIVE | TGA up pulls cash into Treasury; TGA down injects it. |
| RRP | +$24.9B | NEGATIVE | RRP up parks cash at the Fed; RRP down releases it. |
| Net liquidity | -$20.9B | MEANINGFUL DRAIN | 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% | -40 | -14.00 |
| 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% | -30 | -3.00 |
| Metric | Value |
|---|---|
| Weekly URLI | -33.50 |
| 4-week moving average | -16.81 |
| 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 | NEGATIVE |
| 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 | MILD LIQUIDITY DRAIN |
| 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 — 2026-06-12 estimate
| Item | Estimate | Bias |
|---|---|---|
| Projected URLI point | -27.00 | SLIGHT DRAIN / MIXED |
| Backtested URLI range | -20 to -34 | RANGE |
| Projected net liquidity | -$15B to +$10B | NEUTRAL |
| Confidence | Medium-low; exact Treasury settlement amounts, TGA path, and RRP response must be observed. | WATCH |
Model track record: last 5 completed projections hit 4/5; mean absolute URLI error 28.40.
Assumptions
- NY Fed SOMA purchases provide roughly +$5B to +$7B of technical support through the end of the May 14-June 11 purchase period.
- Treasury TGA is closer to the $900B end-June cash-balance assumption, so the next-week TGA rebuild risk is smaller than the prior week but still negative if bill settlement dominates.
- RRP is assumed roughly stable because next-week RRP usage is not scheduled and must be observed.
- CPI on June 10 and the June 16-17 FOMC meeting are the main rate-path watch items.
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.
Next-week liquidity calendar
| Date | Event | Expected Size | Liquidity Effect | Bias |
|---|---|---|---|---|
| 2026-06-08 | 13-week and 26-week Treasury bill auction / settlement watch | Auction announcement required | Coupon settlement and bill auction cash flows can drain liquidity if cash moves into Treasury | NEGATIVE |
| 2026-06-09 | 6-week and 52-week bill auction / settlement watch | Auction announcement required | Bill settlement can rebuild TGA and drain reserves unless offset by RRP release | NEGATIVE |
| 2026-06-10 | May CPI release and 17-week bill auction | Auction announcement required | CPI has no direct flow; auction and settlement flows are cash-flow dependent | NEUTRAL |
| 2026-06-11 | 4-week and 8-week bill auction; end of current NY Fed SOMA purchase period | Auction announcement required | Treasury cash flow versus remaining SOMA support | NEUTRAL |
| 2026-06-12 | Producer prices / consumer sentiment watch | N/A | No direct flow; can tighten or ease financial conditions via yields and Fed path | NEUTRAL |
| 2026-05-14 to 2026-06-11 | NY Fed SOMA Treasury purchases, final days of the current monthly period | $16.3B reinvestment + $10B reserve-management purchases over the period | Technical reserve support / liquidity positive | POSITIVE |
| 2026-06-16 to 2026-06-17 | FOMC meeting and Summary of Economic Projections | N/A | No direct flow; major rate-path and financial-conditions event | WATCH |
| June 2026 | TGA rebuild / bill-CMB pressure watch | Path depends on Treasury cash balance and bill settlement | Potential TGA rebuild / reserve drain | WATCH |
Alerts & Warnings
| Alert | Status | Notes |
|---|---|---|
| Major injection / drain | NEUTRAL | Net liquidity -20.9B; no breach of the +/-$100B threshold. |
| Reserve shock | NEGATIVE | Bank reserves -21.4B; inside the +/-$75B shock band. |
| TGA rebuild risk | WATCH | Treasury assumes a $900B cash balance at end-June and says TGA could peak near $1T +/- $50B in late July; the June 3 Wednesday TGA level was already close to the end-June assumption, reducing but not eliminating forward rebuild risk. |
| RRP shock | NEUTRAL | RRP +24.9B; below the $50B shock threshold. |
| Fed rate path | NEGATIVE | April 29, 2026 FOMC held the target range at 3.50%-3.75%; May 20 minutes showed market-implied expectations of little change this year and options pricing around a 30% hike probability by Q1 2027. The next scheduled FOMC meeting is June 16-17. |
| Funding stress | POSITIVE | SOFR was calm around the policy-rate corridor and no emergency facility jump appeared in H.4.1. |
| Historical significance | NEGATIVE | URLI-Core (4 data components, 75% weight) = -21.00 ranks in the 31st 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 -$20.9B. |
| 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 2026-06-05; previous week 2026-05-29; H.4.1 levels in $M, displayed in $B. |