Fed F**kery Is Back: Seasonal Adjustments Turns $66BN Bank Deposit Outflow Into $41BN Inflow

Following the earlier week’s sizable financial institution deposit outflows, we noticed money-market fund inflows and one more rise within the utilization of The Fed’s emergency funding facility, and given the lagged nature, we’d anticipate that to imply extra outflows from banks within the final week.

Instead, in fact, whole financial institution deposits (on a seasonally-adjusted foundation) rebounded dramatically, up $45BN…

Source: Bloomberg

But – mysteriously, the non-seasonally-adjusted knowledge from The Fed exhibits a large $61BN deposit outflow… magic eh?

Source: Bloomberg

Which leaves the divergence between financial institution deposits and money-market fund belongings much more gaping…

Source: Bloomberg

The huge variation between SA and NSA deposit knowledge comes from Large Banks, which noticed a $38BN influx (SA)  and $2BN influx for Small Banks…

Source: Bloomberg

…and a $51BN outflow (NSA) from Large Banks and $15BN outflow for Small Banks…

Source: Bloomberg

Putting that altogether, Domestic banks noticed a $65.7BN deposit outflow reworked into a way more recovery-narrative-satisfying $41BN deposit influx final week…

Source: Bloomberg

So, for all those that are nonetheless paying consideration, because the begin of March, the SA vs NSA divergence is now $142BN…

On the opposite facet of the ledger, mortgage volumes continued to rise final week with Large banks including $7.8BN and Small banks including $6.9BN…

Source: Bloomberg

Finally, whereas US fairness markets had been decrease in August, they continue to be notably divergent from their historic relationship with financial institution reserves at The Fed…

Source: Bloomberg

We go away you with one thought – in 6 months and counting, America’s ‘smaller’ banks might want to discover that $100-billion plus from someplace as that’s when the BTFP bailout program ends (theoretically). Will regional financial institution steadiness sheets be stabilized by then? They higher hope for a severe recession to smash yields again down (and TSY costs up).