WEEKLY GLOBAL LIQUIDITY UPDATE
Global Liquidity slipped to US$196.08 trillion in the latest data.
• The 3-month annualised growth rate eased to 5.1%
• 12-month growth slowed to 4.4%
Latest data show that headline liquidity slipped for a fourth consecutive week to US$196.08 trillion. Underlying liquidity, measured by the Shadow Monetary Base (SMB), increased to US$107.94 trillion, rebounding from recent weakness and moving above levels recorded over the previous three weeks. The collateral multiplier declined to 1.82 from 1.83, reducing some of the support that elevated collateral efficiency has recently provided to headline liquidity.
Global Liquidity (US$ Trillions)
• Latest level: US$196.08T
(↓ from US$196.11T last week; ↓ from US$196.38T two weeks ago)
• 12-month growth: 4.4%
(↓ from 4.6% last week; ↓ from 5.1% two weeks ago)
• 3-month annualised growth: 5.1%
(↓ from 5.2% last week; ↓ from 5.4% two weeks ago)
Interpretation Headline liquidity eased to US$196.08T. The 3-month annualised growth rate slowed to 5.1% from 5.2% the previous week, while 12-month growth weakened to 4.4%, continuing the recent moderation in liquidity expansion. While overall liquidity conditions remain supportive, both long- and short-term growth measures suggest that the pace of liquidity growth is continuing to slow.
Shadow Monetary Base (SMB)
• Latest level: US$107.94T
(↑ from US$107.06T last week; ↑ from US$106.89T two weeks ago)
• 12-month growth: -1.8%
(↑ from -3.4% last week; ↑ from -3.9% two weeks ago)
• 3-month annualised growth: -3.9%
(↑ from -8.9% last week; ↑ from -11.5% two weeks ago)
Interpretation SMB increased to US$107.94T from US$107.06T the previous week. Annual growth improved to -1.8%, while the 3-month annualised growth rate strengthened to -3.9% from -8.9%. This is in part due to a base effect in the data and in part due to an easing in the pace of contraction. Still nominal SMB is some US$4T below its February peak.
Collateral Multiplier & Volatility Mechanism
Volatility ↓ → Haircuts ↓ → Multiplier ↑ → Liquidity ↑
• Latest multiplier: 1.82
(↓ from 1.83 last week; ↓ from 1.84 two weeks ago)
Interpretation The collateral multiplier declined to 1.82 from 1.83 the previous week, reversing part of the recent increase in collateral efficiency. Despite the decline, the multiplier remains elevated by historical standards and continues to provide significant support to headline liquidity. However, with the multiplier no longer rising, improvements in underlying monetary conditions will need to play a larger role in sustaining liquidity growth going forward.
Volatility plays a key role in collateral efficiency with higher and sustained volatility leading to bigger haircuts and lower liquidity. The MOVE index, a measure of bond market volatility, has moderated from recent highs but at circa 100 it remains well above the 70-80 range recorded from April through September.
Key Takeaways
• Global Liquidity eased to US$196.08T from US$196.11T the previous week.
• The 3-month annualised growth rate slowed to 5.1% from 5.2%.
• 12-month growth softened to 4.4% from 4.6%, indicating a further moderation in liquidity growth.
• SMB annual growth improved to -1.8% from -3.4%.
• SMB short-term growth improved to -3.9% from -8.9%. This is partly due to a base effect in the data, but it also suggests that the pace of contraction is easing.
• The collateral multiplier eased to 1.82 from 1.83, remaining elevated but providing slightly less support to headline liquidity than in recent weeks.