Net Liquidity, Explained With the Fed's Own Numbers
Three public numbers, one subtraction, updated every week. Here is exactly how we compute the net-liquidity read on the terminal and what it is good for.
The short version
Net liquidity is the part of the Federal Reserve's balance sheet that is actually available to the financial system. It is computed as Reserve Bank credit minus the Treasury General Account minus the overnight reverse repo facility. All three numbers are public, official and free. We fetch them every week and show the result next to the dealer map, because a rising or falling pool of liquidity changes how the same gamma structure behaves.
Where each number comes from
- Reserve Bank credit — table 1 of the Fed's weekly H.4.1 release ("Factors Affecting Reserve Balances"), Wednesday level. This is the asset side: securities held outright, repos, loans.
- Treasury General Account (TGA) — the Treasury's checking account at the Fed. It appears in the same H.4.1 table (weekly) and in the Daily Treasury Statement (daily opening balance). Cash sitting there is cash that is not in the banking system.
- Overnight reverse repo (RRP) — money funds parking cash at the Fed. H.4.1 carries the Wednesday level; the New York Fed publishes the daily take-up of the operation.
The subtraction is the whole model. No smoothing, no proprietary adjustment. When the Treasury rebuilds its cash after a debt-ceiling episode, net liquidity falls even if the Fed does nothing. When the reverse repo facility drains, as it did through 2024 and 2025, net liquidity rises even while the balance sheet shrinks.
How to read the weekly change
The level matters less than the direction over a few weeks. A steady drain, several hundred billion over a quarter, tends to coincide with regimes where the same negative-gamma structure produces larger, faster moves: there is less cash to absorb forced hedging. A steady build tends to coincide with regimes where dips at the put wall get bought. This is a tendency, not a rule, and it is the reason the number sits in the context strip on /levels rather than on the chart itself.
Two traps. First, the H.4.1 is a Wednesday snapshot published on Thursday; the daily TGA and RRP numbers move between snapshots, so we show both the weekly composite and the daily pieces. Second, the level of reserves that counts as "ample" drifts with the size of the economy, so compare the trend, not the absolute value against 2021.
What we show on the terminal
The Liquidity widget carries the three components, the net figure, the week-over-week change and a sparkline of the weekly series we have been storing since the feature went live. The same net figure appears in the Morning Map email desk brief and in the context strip above the levels. Sources are named on the widget: U.S. Treasury, Federal Reserve, New York Fed.
Why an index trader should care
Dealer hedging is mechanical: it tells you what must be bought or sold when price or volatility moves. Liquidity tells you how much the rest of the market can absorb. The two together are a better description of a session than either alone. If net liquidity has been draining for six weeks and the book is short gamma, the walls are thinner than they look. If liquidity has been building and the book is long gamma, the pin at max pain has more friends.
None of this is a signal. It is the same context a rates desk keeps on its second monitor, computed from the primary sources and shown next to the structure you already use.
Educational content. Nothing here is a signal, investment advice or a prediction. Every number is a description of option-market structure or of public official data at a point in time.