Prediction of the liquidity trend of the US dollar within the year. At the end of July, we talked about the formation of a bottom divergence pattern in the big pie, but it is still far from the zero axis. In the past two weeks, the big pie has been oscillating in a narrow range. What is the reason for this? From a personal perspective, the liquidity of the US dollar has not been strong recently and has slightly weakened, slowly dropping from a scale of 3 trillion yuan at the end of July to 2.94 trillion yuan by the middle of this week. At the end of July, it was discussed that a good form also requires liquidity support, but in reality, liquidity has slightly weakened, and the issuance of stablecoins has not recovered and has also slightly weakened. In the past two years, I have written multiple tweets on the relationship between the trend of the Big Dipper and the liquidity of the US dollar, all of which are summarized in this long article from March. https://(x.com)/qinbafrank/status/2029816341361025505? S=46&t=k6rimWSEbo2D2TXolYcM-A Simply put, the trend of the big pie is closely related to the liquidity of the US dollar centered on the reserve size of US banks. This week, the US Treasury Department announced its refinancing plan and the expected target for TGA within the year, which can be used to infer the liquidity of the US dollar (with a focus on bank reserves) from next year to December. 1. Current state As of August 12th, Bank of America reserves amounted to $2.9476 trillion, while the Treasury Department's TGA959.4 billion. From mid July to August 12th: TGA's weekly average rose from $756.2 billion to $963.9 billion, an increase of approximately $207.7 billion; The average weekly reserve for the same period decreased from $3.143 trillion to $2.944 trillion, a decrease of approximately $198.7 billion. It's almost a one-to-one relationship. It can also be seen that after mid July, Da Bing's upward momentum has become somewhat weak. So, how do we proceed? 2. August There will be a partial pumping first, followed by a high probability of reserve recovery 1) The refinancing issuance scale in mid August was $125 billion, corresponding to $96.3 billion of maturing bonds. The Ministry of Finance raised a net new cash of approximately $28.7 billion, which was settled on August 17th. If fiscal expenditures cannot be fully offset on the same day, TGA may briefly remain around $960 billion to $1 trillion, creating local pressure on reserves of approximately $20 billion to $40 billion. Around August 17-20, it is estimated that bank reserves may briefly fall around 2.90 trillion yuan. Of course, this is more like a short-term low caused by settlement, 2) In late August, fiscal expenditures will inject liquidity back into the banking system The Ministry of Finance stated in its quarterly financing announcement that it will maintain the issuance scale of benchmark treasury bonds in the near future and may issue short-term cash management treasury bonds by the end of August. In September, due to an increase in corporate tax and non withholding tax revenue, the size of some short-term Treasury bonds will be reduced. This sends a signal: the Ministry of Finance expects significant cash expenditures by the end of August, which may require short-term CMB bridging, but there is no need to maintain such a high amount of treasury bond issuance after tax revenue is received in September. The period from late August to early September in previous years is usually a window of TGA decline and reserve inflow. The benchmark assumption is that TGA will decrease to $890-9300 billion by the end of August to early September, compared to the release of approximately $30-70 billion in reserves on August 12th, The corresponding reserve requirement range for banks at the end of August was about 2.96 trillion to 3.02 trillion US dollars, which can be said to have rebounded to around 3 trillion US dollars. 3. September The beginning of the month is relatively loose, and around September 15th is the most important pressure window 1) On September 4th and 10th, the Ministry of Finance arranged two cash management buybacks to provide a buffer, totaling up to $25 billion. So early September may be the stage of relatively high reserve requirements and relatively loose funding for the next month and a half. I estimate that reserves may reach $2.97 trillion to $3.03 trillion from September 4th to 10th, slightly higher than the end of August. 2) Around September 15th Tax and treasury bond settlement form superposition pumping The Ministry of Finance has clearly stated that it will receive a larger scale of corporate income tax and non withheld personal tax in mid September. At the same time, there are concentrated treasury bond settlement in the days around September 15, both of which will lead to the rise of TGA. Natural reserves will decrease Between September 15th and 18th, bank reserves may reach a temporary low of $2.85 trillion to $2.92 trillion, with a median value of $2.85 trillion. 3) At the end of September The Ministry of Finance will have to concentrate on settlement around September 30th, but considering that the TGA target for the end of September is still $950 billion. Therefore, if the tax revenue pushes TGA to around $1 trillion in mid September, the Ministry of Finance will have to spend money in late September, so the weekly average of bank reserves slightly rebounded to $2.90 trillion to $2.95 trillion in late September 4. Fourth quarter The previous financing plan of the Ministry of Finance showed a TGA target of $950 billion by the end of September; Private sector net market-oriented financing of $628 billion in the fourth quarter; TGA targets $850 billion by the end of December. This means that from the end of September to the end of December, the TGA plan will see a net decrease of $100 billion, which is equivalent to releasing approximately $100 billion in reserves to the banking system, assuming that the Federal Reserve's assets, cash, and other liabilities remain unchanged. But the Ministry of Finance also stated that it has made it clear that TGA will not directly decline from $950 billion to $850 billion, but will rise sharply in October: it is expected that TGA will reach $1.05 trillion in late October, with an error range of ± $50 billion. That means the TGA scale will first increase and then decrease in the fourth quarter. So it means that bank reserves will first decrease and then increase in the fourth quarter. In late October, bank reserves will reach a low point in the second half of the year and may further fall back to the $2.8 trillion range (with a fluctuation of $450 billion); According to the Ministry of Finance's plan, the TGA target for the end of December is $850 billion, a decrease of $200 billion from the end of October. So by the end of December, the average weekly reserve may return to $3 trillion (with a fluctuation of $30 billion). in general: 1) From August 17th to 20th, reserves hit a short-term low (around 2.9 trillion yuan), and there was a mild rebound in late August (around 3 trillion yuan); 2) Continuing to maintain in early September, what really needs attention are the two concentrated pressure windows of the tax period on September 15th and the end of the quarter on September 30th; 3) The fiscal liquidity path for the fourth quarter is: $950 billion TGA at the end of September → around $1.05 trillion in late October → $850 billion at the end of December. This means that withdrawing about $50 billion to $150 billion in reserves in October is the most dangerous window for the fourth quarter; In November, fiscal expenditures began to release the previously accumulated cash, and reserves gradually recovered; The mid December corporate tax period brought a brief water withdrawal; After TGA fell to $850 billion at the end of December, the reserve requirement is likely to approach $3 trillion again. 4) The low point of reserve funds in late October was about 2.8 trillion US dollars; At the end of November, it rebounded to above 2.9 trillion US dollars; Short dip again in mid December; At the end of December, it rebounded to 2.95 trillion to 3.03 trillion US dollars.