A four-indicator map of U.S. liquidity

Liquidity is an important market backdrop, but the phrase “more money” is too broad. WIP Labs splits U.S. liquidity into M2 money stock, reserve balances, reverse repo balances, and the Treasury General Account.

M2 and reserves

M2 measures broad money held by households and businesses. Reserve balances show the cash banks hold at the Federal Reserve. Rising values are generally supportive for the macro and banking-system liquidity backdrop.

RRP and TGA

Reverse repo balances represent cash parked at the Fed. A decline can release cash back toward markets. The Treasury General Account is the U.S. Treasury’s cash balance at the Fed; a rising TGA can drain money from the private and banking system.

Why combine them

One indicator can mislead. M2 can rise while TGA drains near-term liquidity. That is why WIP Labs also follows a practical proxy: reserves minus RRP minus TGA.