Latest take on the US liquidity crunch heading into late November 2025.

Even after multiple rate cuts from the Fed this cycle, the money markets are showing clear stress signals. Why? Three massive headwinds converging at once.

First up: quantitative tightening isn't stopping. The Fed keeps shrinking its balance sheet, pulling liquidity out of the system month after month. That's tighter conditions by design.

Second factor: Treasury issuance has gone parabolic. The government's flooding the market with new debt, and that's sucking up available cash like crazy. More supply competing for the same pool of dollars.

Third piece of the puzzle—and this is where it gets interesting for risk assets—these dynamics are creating real friction in overnight lending markets. Rates are bumping higher in repo markets even as the Fed cuts its benchmark rate. That disconnect tells you something important about actual liquidity conditions versus headline policy.

Bottom line? The liquidity picture remains complicated despite surface-level easing. Rate cuts sound dovish, but when you're simultaneously draining reserves through QT while Treasury needs to fund massive deficits, the net effect on market liquidity can still be restrictive.

This matters for volatile assets. When money market stress builds, capital tends to flow toward safety first. Keep an eye on overnight funding rates and reserve balances—they're better real-time indicators than the Fed funds rate right now.