Thursday, February 2, 2012
Fiscal Liquidity Index for 2/2/2012
The index closed negative once again, but with some marked improvement at -45.3. That is actually the least negative it has been in eleven days. The raw (un-smoothed) index was -5. That’s the best reading in 33 days and it’s almost back in positive territory. As I suspected, right after the debt ceiling was raised Treasury sold a bunch of debt and is now in the process of spending those proceeds back into the economy. That means the indices are likely to turn positive in the next day or so. Treasury started Feb off with a gross deficit of $37.9 bln. That compares to a gross surplus of $2.7 bln at the start of Jan. Deficits are good because they add to private sector financial balances. Real net spending (total outlays adjusted for public debt redemptions) totaled $55.8 bln. That is $6.7 bln below last month. So we see that the big deficit at the start of the month was mainly due to redemptions and not actual spending. The divergence indicator was 170.9. That’s still red, but it’s come down quite a bit and getting close to going back to orange.