Research Framework
The DLI Liquidity Score synthesizes structural data from the Federal Reserve system and capital markets through a four-stage quantitative pipeline:
Direct integration with FRED, US Treasury Fiscal Data, and NY Fed Markets APIs — automated ingestion with cross-frequency alignment
The headline spine — net liquidity (Fed balance sheet − TGA − ON RRP) — is measured as a smoothed 6-month-equivalent flow; the credit and market-risk context tiers use rolling 5-year tightness percentiles. Indicator pages also show 10-year median/MAD z-scores for magnitude context
The 10 tracked indicators are grouped into 4 transmission tiers shown on the Liquidity Map: Policy/Reserves, Funding/Plumbing, Credit/Intermediation, Risk/Price. The headline is driven by the first two — the net-liquidity flow (Policy) and an acute funding-stress override (Funding: the SOFR-IORB spread and SRF usage). The credit and market-risk tiers are shown as context and do not feed the headline directly.
The net-liquidity flow maps to an impulse (loose when liquidity expands, tight when it drains); when the system cash buffer is thin, the sensitivity to a DRAIN is amplified (a reserve-relative flow gain, drains-only, so it does not misfire in ample-reserve regimes). An acute funding-stress override (the SOFR-IORB spread, the SOFR distribution tail, and SRF usage) is combined via a noisy-OR and EWMA-smoothed, yielding an absolute 0-100 headline. Below 33 is loose (risk-on); above 67 is tight (risk-off). The score is an absolute level — not a percentile — so it means the same thing across cycles. Beyond this "flow" score, the state carries a second, orthogonal "structural vulnerability" axis (buffer thickness × whether funding is starting to bite): a calm flow on a thin cushion reads as fragile. Important: the DLI is a dollar-liquidity stance gauge over weeks to months, not a market-stress or crisis detector.
The site tracks 19 indicators; 10 core ones are organized into 4 tiers — Policy/Reserves, Funding/Plumbing, Credit/Intermediation, and Risk/Price. The DLI headline is not a weighted average of these tiers: its spine is the smoothed 6-month-equivalent flow of net liquidity (Fed balance sheet - TGA - ON RRP) from the Policy tier, plus an acute funding-stress override (SOFR-IORB and SRF) from the Funding tier; the Credit and Risk/Price tiers are shown as supporting context, not folded into the headline. The percentages in the table below weight the tier-breakdown view shown elsewhere on the site, not the headline.
Net Liquidity, M2, the reserve buffer, and offshore funding gauges are tracked for context. The DLI headline is driven by the net-liquidity flow (Fed balance sheet - TGA - ON RRP) plus a funding-stress override; credit and market-risk tiers are context, not headline inputs.
| Tier | Weight | Indicator | Tightening Signal |
|---|---|---|---|
| Policy / Reserves | 65% | Fed BS Size | ↓ Falling = Tighter liquidity |
| TGA Balance | ↑ Rising = Tighter liquidity | ||
| ON RRP | ↑ Rising = Tighter liquidity | ||
| Funding / Plumbing | 10% | SOFR-IORB | ↑ Rising = Tighter liquidity |
| SRF Usage | ↑ Rising = Tighter liquidity | ||
| Credit / Intermediation | 5% | Cash Buffer | ↓ Falling = Tighter liquidity |
| HY Spread | ↑ Rising = Tighter liquidity | ||
| Risk / Price | 20% | VIX | ↑ Rising = Tighter liquidity |
| Dollar Index | ↑ Rising = Tighter liquidity | ||
| 10Y Real Yield | ↑ Rising = Tighter liquidity |
The DLI Score uses fixed absolute thresholds on the 0-100 scale to classify liquidity: below 33 is loose, 33–67 neutral, above 67 tight. An absolute score (rather than a rolling percentile) keeps the meaning consistent across macro cycles.
| Score | Liquidity Condition | Risk Bias (Secondary) | Interpretation |
|---|---|---|---|
| < 33 | Loose | Risk-seeking tilt | Loose liquidity — generally favorable for risk assets |
| 33 – 67 | Neutral | Balanced | Conditions in the mid-range — watch marginal shifts and drivers |
| > 67 | Tight | Defensive tilt | Significantly tight liquidity — risk assets face strong headwinds |
Liquidity indicators carry 1-7 days of release lag, and the indicators themselves move daily. A regime label at t therefore does not constrain asset performance at t+20 — by then the DLI itself has moved into a different state.
Current State
DLI tells you whether dollar liquidity right now is loose, neutral, or tight. That is what it is built for.
Coincident Correlation (≤10d)
If DLI tracks real liquidity, it shows up as coincident correlation within ~10 days. Beyond that horizon, the indicators themselves have drifted.
No Forward Prediction
We deliberately do not show "average 20 / 60-day forward returns under each regime" — those numbers mix unrelated states and produce spurious signals.
Central-bank financial-conditions / liquidity indices (Chicago Fed NFCI, ECB CISS, etc.) are validated contemporaneously, not by forward returns. The DLI is the same kind of object — a policy-and-plumbing-driven coincident *stance* index — so the right test is coincident correlation (the asset view shows the 1 / 5 / 10 / 20-day decay), not forward backtests. To be clear: the DLI is not equivalent to a market-stress or crisis index — it measures how loose or tight the liquidity stance is, not the acute-stress events themselves.
This site is for informational and educational purposes only. It does not constitute financial advice. All data comes from public sources; we do not guarantee completeness or timeliness. Investment decisions should be based on personal research and professional consultation.