Upcoming End of the Shutdown & Market Liquidity

The end of a U.S. government shutdown is often interpreted as a mere political signal. Yet, from a financial perspective, this event can mark a major turning point for global liquidity. One of the most direct mechanisms through which this occurs is the Treasury General Account (TGA) — the U.S. Treasury’s main account at the Federal Reserve (Fed).

1) The TGA: a true liquidity reservoir

The TGA functions as the federal government’s current account.
When it receives revenues (taxes, bond issuance, etc.), funds are deposited there. When it spends — salaries, contractor payments, social programs — those amounts leave the TGA and flow toward commercial banks and households.
Each dollar spent by the Treasury exits the Fed and enters the private sector, increasing bank reserves and overall financial system liquidity.
Conversely, when the Treasury issues bonds and collects money from investors, bank reserves decline since those funds are transferred into the TGA.

2) Shutdown: a period of silent contraction

During a shutdown, the government is largely paralyzed. Many payments are suspended or delayed, reducing cash outflows.
As a result, the TGA drains much more slowly, and available liquidity in the financial system decreases. It is worth noting that the TGA had just finished refilling in early October — exactly at the onset of the shutdown.


3) The end of the shutdown: a sharp reinjection

As soon as the shutdown ends, the U.S. Treasury must catch up on deferred spending — wages, contracts, and federal programs.
These large disbursements cause a rapid decline in the TGA, equivalent to a direct injection of liquidity into the economy.
Bank reserves increase mechanically, repo rates may ease, and risk assets — equities, high-yield bonds, crypto-assets — often experience a short-term rebound.
This liquidity surge is not sustainable: once payments are settled, the Treasury usually reissues debt to rebuild the TGA to its target level. This reverse phase then withdraws the excess liquidity from the market.
In the short term, however, the end of a shutdown acts as a positive liquidity pump, capable of influencing the trend of risk assets on financial markets.





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