Milk Road Macro 2026 Liquidity Outlook: Is the Global Liquidity Cycle Past Its Peak? w/ Michael Howell
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Dec 25, 2025 
Michael J. Howell, Founder and CEO of Cross Border Capital and an expert on global liquidity, shares insights on the potential liquidity landscape for 2026. He discusses the end of quantitative tightening, the impact on bank reserves, and how current dynamics may not align with investor expectations. Michael highlights the risks of monetizing debt, contrasts Fed and Treasury QE, and explores how real economy strength can exist alongside a muted financial market. He also emphasizes the importance of commodities and real assets for future investments.
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Fed Pivot Might Not Fully Refill Liquidity
- The Fed has been pushed into ending QT and may restart reserve-management purchases under different names.
- Those operations may not inject enough liquidity to replace reserves drained by a large TGA and heavy bill issuance.
TGA And Bill Issuance Are Draining Bank Reserves
- A large Treasury General Account (TGA) and heavy short-term bill funding are keeping bank reserves ~400bn below banks' comfort level.
- That shortfall has driven repo stress and widened the gap between SOFR and IORB, signaling real liquidity strain.
Watch Fed Purchase Size, Not Just The Name
- Monitor Fed purchase cadence: $20bn/month may be insufficient, while $40bn/month could close the reserve gap.
- Watch SOFR-IOBR spreads and Fed communications to gauge whether easing volumes will rise.