First Sign of Reserve Improvements

Great news. Bank reserves have shown the first sign of change for the better.

For January, non-borrowed reserves have finally revealed a down tick. Sure, it's no big change, but it is the first sign. They've been steadily rising as the fed "adds reserves" (aka prints money) to buy agency debt. Note that this down-tick occurred in January while the fed was still adding reserves. That means banks are starting to lend again.

It's no surprise then that the TAF and discount rates were revised this week back toward pre-crisis conditions. No doubt the fed has better data than this nearly month-old update.