End of the 2025 Shutdown: Immediate Impact on Liquidity

The reopening of the U.S. government at the end of the 2025 shutdown is expected to trigger a swift return of liquidity to financial markets. This recurring phenomenon will have a distinct magnitude this time due to the specific conditions of the U.S. Treasury General Account (TGA) and the current federal funding structure.

1) A fiscal context unlike previous shutdowns

In past episodes, notably in 2019, the U.S. Treasury exited the shutdown with very low cash balances—typically between $100 and $200 billion. To rebuild this buffer, it had to issue large amounts of short-term Treasury bills, which drained liquidity from the banking system as investors used reserves to buy the securities.

In 2025, the situation is reversed. The Treasury holds a high cash balance—estimated between $850 and $900 billion—because the federal government’s account at the Fed (the TGA) was replenished at the end of September. This provides ample room to finance near-term public spending without issuing new debt. The result is an absence of pressure on money markets and stable bank reserves.


2) Liquidity injections from day one

With abundant cash reserves, the Treasury can promptly resume pending payments—federal salaries, public contracts, and suspended programs. These payments act as direct liquidity injections into the financial system, starting within the first weeks following the end of the shutdown.

In previous reopenings, this process began only after three to four weeks. In 2025, it could start as early as week one or two, significantly shortening the normalization timeline for market liquidity.

3) Moderate but positive market effects

This faster liquidity return should lead to:
• unchanged or slightly lower bond yields, given steady demand and the absence of additional issuance;
• a slightly weaker dollar, reflecting easier financing conditions.
Overall, this points to a quicker and more orderly normalization of the monetary system compared to 2019, potentially supporting risk assets in the short term.





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