Fed F**kery Is Back: Seasonal Adjustments Turns $66BN Bank Deposit Outflow Into $41BN Inflow

Following the previous week’s sizable bank deposit outflows, we saw money-market fund inflows and yet another rise in the usage of The Fed’s emergency funding facility, and given the lagged nature, we would expect that to mean more outflows from banks in the last week.

Instead, of course, total bank deposits (on a seasonally-adjusted basis) rebounded dramatically, up $45BN…

Source: Bloomberg

But – mysteriously, the non-seasonally-adjusted data from The Fed shows a massive $61BN deposit outflow… magic eh?

Source: Bloomberg

Which leaves the divergence between bank deposits and money-market fund assets even more gaping…

Source: Bloomberg

The big variation between SA and NSA deposit data comes from Large Banks, which saw a $38BN inflow (SA)  and $2BN inflow for Small Banks…

Source: Bloomberg

…and a $51BN outflow (NSA) from Large Banks and $15BN outflow for Small Banks…

Source: Bloomberg

Putting that altogether, Domestic banks saw a $65.7BN deposit outflow transformed into a much more recovery-narrative-satisfying $41BN deposit inflow last week…

Source: Bloomberg

So, for all those who are still paying attention, since the start of March, the SA vs NSA divergence is now $142BN…

On the other side of the ledger, loan volumes continued to rise last week with Large banks adding $7.8BN and Small banks adding $6.9BN…

Source: Bloomberg

Finally, while US equity markets were lower in August, they remain notably divergent from their historical relationship with bank reserves at The Fed…

Source: Bloomberg

We leave you with one thought – in 6 months and counting, America’s ‘smaller’ banks will need to find that $100-billion plus from somewhere as that is when the BTFP bailout program ends (theoretically). Will regional bank balance sheets be stabilized by then? They better hope for a serious recession to smash yields back down (and TSY prices up).