Wall Street Is Looking Ahead to September Liquidity Pinchpoints

Market participants are increasingly focusing on potential signs of liquidity constraints in funding markets as the Treasury Department ramps up its bill supply to rebuild its cash pile.

Since Congress lifted the debt ceiling last month, Treasury has issued about $328 billion of short-dated government securities in order to rebuild its cash balance. That draws money out of the financial system, leaving it vulnerable to unexpected events. For now, bank reserves still remain abundant at around $3.33 trillion, providing a necessary cushion for funding markets, according to the latest Federal Reserve data.