Tax season is over, and liquidity is indeed improving. Let’s take a look at Q2 and Q3 liquidity based on the Treasury’s borrowing estimates and refinancing plans. As of May 6, bank reserves have already rebounded to over $3.03 trillion, mainly due to increased spending from the Treasury’s TGA account. Looking at the borrowing estimates and quarterly refinancing plans released by the Treasury this week: 1) Q2 Estimate: The Treasury expects net borrowing in Q2 to reach $189 billion. This figure is $79 billion higher than the previous estimate, primarily due to weaker-than-expected net cash flow. The TGA cash balance target for the end of June is set at $900 billion. 2) Q3 Estimate: With increased fiscal spending, borrowing needs in Q3 are expected to surge to $671 billion. The TGA balance target for the end of September is set at $950 billion, and the Treasury has indicated that the TGA account balance could peak at $1 trillion (±$50 billion) in late July. In this refinancing plan, the Treasury has opted for a “steady as she goes” strategy to avoid additional shocks to long-term yields: 1) Long-term bond issuance stabilized: The Treasury plans to issue $125 billion in medium- to long-term bonds (3-year, 10-year, and 30-year) in May. More importantly, the Treasury believes the current auction sizes are sufficient to meet future fiscal needs, so it announced that it will maintain the auction sizes for all nominal coupon bonds and floating rate notes (FRNs) unchanged for the next few quarters. 2) Flexible adjustment via short-term bills: To address the surge in financing needs in Q3, the Treasury will primarily rely on adjusting the supply of short-term Treasury bills. It plans to further increase the issuance of benchmark short-term bills in May and issue cash management bills (CMBs) in late May to handle the liquidity peak at month-end. Then, in June, as corporate tax payments roll in mid-month (boosting tax revenue), the Treasury will moderately reduce the auction size for short-term bills. 3) Regularized Treasury buybacks: The Treasury’s regular buyback operations are proceeding as planned. Over the next quarter, it is expected to repurchase up to $38 billion in inactive long-term bonds (for liquidity support) and up to $25 billion in bonds within the 1-month to 2-year maturity range (for cash management). Looking at the Treasury’s spending pace via the TGA account, bank reserves in May and June are highly likely to rebound to over $3.1 trillion, possibly even touching $3.2 trillion. However, there may be a liquidity drain moment in late June, as the Treasury aims to maintain the TGA balance at $900 billion by the end of the month. From a personal perspective: Liquidity in the U.S. is “relatively loose” in Q2, but starting in Q3, it will clearly shift toward “tightening.” Sticking to the May 4th view: liquidity improvement is good news for risk assets like Bitcoin. Sponsored by @bitget_zh, "Bitget Buy US Stocks: Instant entry, seamless trading