The Fed’s balance sheet may soon expand again: The Treasury General Account (TGA) has surpassed 900 billion for the first time since 2021. The TGA is the US government’s main checking account at the Federal Reserve, used to hold and spend federal funds. It has now risen by +666 billion since June. As the TGA rises, it makes short-term borrowing in the repo market more expensive, where banks and institutions lend and borrow overnight using Treasuries as collateral. Repo market activity now runs at ~3 trillion daily, TRIPLING over the last 3 years, as demand for short-term cash rises with tighter liquidity conditions. If these funding pressures persist, the Fed may have no choice but to expand its balance sheet again to stabilize markets. Liquidity cracks are widening.(The Kobeissi Letter)