16 MAY 2024
The Treasury General Account (TGA) is the US government’s current account at the Federal Reserve. It’s used to manage day-to-day Federal spending and is where the Treasury department deposits the funds it raises from tax receipts and new debt issuance.
In an era of politically-charged fiscal dominance it is playing an important role in market price action.
As a general rule, when the balance is rising it means liquidity is being sucked out of the financial system, which tends to coincide with a “risk off” trend in markets. Indeed, its recent spike to around U$1trn (a two-year high) is one of the reasons why equity markets have softened over the past few weeks.
That said, we can be reasonably confident that the TGA is more likely to fall than rise from current levels, particularly in an election year that will see the Democrats want to deploy funds in a way that boosts voter sentiment via economic growth initiatives and a rising stock market.
The risk, of course, is that further fiscal injections will lead to higher inflation rates, which are already settling well above the Federal Reserve’s 2% target. But, for now, the positive liquidity trend seems to be trumping any concerns over inflation and interest rates.
The content of this communication is for information purposes only. Bentley Reid believes that, at the time of publication, the views expressed and opinions given are correct but cannot guarantee this and viewers intending to take action based upon the content of this communication should first consult with the professional who advises them on their financial affairs. Neither the publisher nor any of its subsidiaries or connected parties accepts responsibility for any direct or indirect loss suffered by a recipient as a result of any action or inaction, in reliance upon the content of this communication.
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