🚨 Upcoming US Treasury Refunding: A Key Liquidity Event

Next week, the US Treasury is set to execute a substantial refunding operation, which will withdraw $125 billion in liquidity from the financial system. This significant event warrants careful attention from market participants.

The refunding schedule is as follows:
$58B in 3-year bonds on Feb 10
$42B in 10-year bonds on Feb 11
$25B in 30-year bonds on Feb 12
The final settlement for these bonds is scheduled for Feb 17.

When the Treasury sells bonds, buyers pay cash, effectively reducing the overall liquidity available in the system. A decrease in systemic liquidity can often correspond with heightened risk across various asset classes.

These bond auctions act as a crucial stress test for market demand. Strong demand typically results in stable yields and a calmer market environment, allowing risk assets to maintain their positions.

Conversely, weak demand at these auctions can lead to a surge in yields, further tightening liquidity. This scenario can potentially trigger a selling cascade, impacting multiple markets.

Historically, shifts in bond markets tend to precede movements in equities. For the crypto market, these macro liquidity shifts can often lead to more pronounced and rapid price reactions.

The critical factor here is the timing of these liquidity withdrawals, not just the new debt itself. The period from Feb 10-12 will be key for observing market reactions, with the full cash settlement on Feb 17.

It's important for market participants to monitor these developments closely. Relying solely on current chart patterns without considering these significant macro liquidity shifts could present an incomplete picture.

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