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 12 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 25 indicators; 12 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, and most offshore gauges are tracked for context. The DLI headline is driven by the net-liquidity flow (Fed balance sheet - TGA - ON RRP), a reserve-scarcity stock leg, and a funding-stress override (SOFR-IORB, SRF, rising Fed swap lines); 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 | ||
| Reserve Buffer | ↓ Falling = Tighter liquidity | ||
| Funding / Plumbing | 10% | SOFR-IORB | ↑ Rising = Tighter liquidity |
| SRF Usage | ↑ Rising = Tighter liquidity | ||
| Fed Swap Lines | ↑ 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.
Equity valuation is tracked on this site and is not part of this score. The forward P/E series carry no dliGroup, so they never reach the engine — the DLI measures a liquidity stance (a flow plus funding stress), and a multiple is a price. The same rule keeps reserve and TGA levels out: a level is a stock, and the headline tracks the flow. Reading the two side by side is the point; folding one into the other would make both unreadable.
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.