Fiscal Liquidity Index for 2/1/2012

Current situation:

The negative streak continued with the Index now logging an uninterrupted 30 days in the red. That is, by far, the longest negative streak in the three years since I have been collecting the data. The reading was -69.9, which was actually a slight improvement from the prior day’s reading of -78.2. The raw (un-smoothed) index showed some improvement as well, to -49.7 from Tuesday’s reading of -81.3. Treasury had a gross surplus of $72.9 bln for the month so far. That is the highest surplus since Aug 30, 2010. Surpluses are worrisome since surpluses drain private sector financial balances. Large ones do that that even more so. But it’s important to note that yesterday’s surplus was really the result of the first sale of Treasuries since the lifting of the debt ceiling. The Treasury sold $117.4 bln of public debt securities. It’s very likely that these funds will be quickly spent back into the economy. Real net spending (total outlays adjusted for public debt redemptions) totaled $321.7 bln. That was $20.9 bln above the same time last month. The divergence index was 194. That keeps the risk level at red.