Core Viewpoint - A surge in U.S. Treasury bill issuance has led to reduced liquidity in the financial sector, raising concerns about potential funding market stress in September [1][5]. Group 1: Liquidity Concerns - The increase in Treasury bill issuance has prompted fears of a liquidity squeeze similar to the one experienced in September 2019, which resulted in a spike in short-term borrowing rates [2][5]. - Current measures of liquidity indicate stress, such as higher overnight borrowing costs collateralized by Treasuries, although overall bank reserves are significantly higher at $3.2 trillion compared to 2019 [4][5]. Group 2: Market Reactions - Investors are preparing for potential volatility by setting aside cash, which could lead to reduced demand for assets like stocks and corporate bonds [1]. - The upcoming corporate income tax date on September 15 and the end of the September quarter may exacerbate liquidity pressures, as banks typically reduce intermediation activity during these times [5]. Group 3: Historical Context - The liquidity issues in September 2019 were triggered by a drop in bank reserves due to large corporate tax payments and Treasury debt obligations, necessitating Federal Reserve intervention [3][4]. - The Federal Reserve's ongoing reduction of its bond holdings has drawn attention to liquidity conditions, contrasting with the current higher bank reserves [4][5].