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Treasury and FX steps cited as “soft-form financial repression”
The actions include increasing long-term bond buybacks after the 30-year yield reached its highest level in nearly 20 years and encouraging use of Japan’s FIMA liquidity tool.
With U.S. debt around $40 trillion, a Yahoo Finance piece argues that recent Treasury moves in bond and currency markets suggest a focus on lowering debt costs rather than addressing underlying causes. According to the report, Treasury Secretary Scott Bessent announced a plan to raise buybacks of long-term bonds after the 30-year yield hit the highest level in nearly 20 years. It also says the U.S. and Japan took joint steps to boost the yen, with the U.S. selling euros instead of dollar-denominated assets to avoid further upward pressure on yields.
The article adds that Japan avoided selling Treasuries by using an off-market liquidity tool called the Foreign and International Monetary Authorities Repo Facility, or FIMA. It describes how Japan, as the world’s largest holder of U.S. debt, can borrow dollars against its Treasury holdings for a limited form of liquidity.
Deutsche Bank’s George Saravelos is quoted in the piece as describing both the buyback plan and encouragement to use the FIMA facility as “soft-form financial repression” aimed at containing the long end of the U.S. yield curve. The article notes that financial repression generally refers to government policies designed to keep interest rates artificially low by influencing financial markets.