Reuters writes, "Wall Street gears up for US tax season liquidity test." The article comments, "Wall Street is bracing for a potential bout of stress in money markets by putting some cash on the side ahead of U.​S. tax day, when high tax-​related outflows could hurt market liquidity. Tax season, which culminates on April 15 when income tax returns are to be submitted to the U.​S. federal government, is typically associated with a drop in financial sector liquidity as individuals draw down cash from bank deposits and money market funds to pay their taxes." It explains, "Liquidity, measured by bank reserves at the Federal Reserve and the Fed'​s overnight reverse repo facility (​RRP) -- a favored place for money market funds to park their cash -- is still considered abundant, but high capital gains from booming stock markets last year could make outflows particularly sizeable this year, analysts have said, a scenario that could lead to a surge in short-​term interest rates." The piece quotes Joseph D'​Angelo, head of PGIM Fixed Income'​s money markets team, "It could be bumpy getting over that period. To be defensive ... you would effectively manage your maturities in such a way that you make sure you have enough liquidity in front of that date." Reuters adds, "Having more cash available ahead of tax day could also allow fund managers to take advantage of any potential volatility, some of them said, should borrowing costs increase because of higher demand for cash."

Your Name:
Your Email:
Recipient Email(s):

Use a comma or a semicolon to separate

Please retype symbols from the image:

Optional Message

Daily Link Archive