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Treasury yen and debt actions could shift FX headwinds for international ETFs
The Treasury said it will double liquidity-support buybacks of 10-to-30-year debt, targeting $4 billion per operation after the 30-year yield hit 5.34%, Thornburg said.
For years, investors buying international stocks have faced two pressure points, US market outperformance and a strengthening dollar. ETF Trends highlights new steps by the US Treasury that could ease the dollar factor over time, while also pointing to sensitivity in Washington to spillovers from currency strength and higher long-term yields.
According to Thornburg Investment Management, the Treasury intervened alongside Japan within three weeks to support the yen, including euro sales to fund yen purchases rather than selling dollars. Thornburg also said the Treasury doubled liquidity-support buybacks of 10-to-30-year debt on August 19, raising the target to $4 billion per operation.
Thornburg linked the buyback increase to a spike in the 30-year yield to 5.34%, its highest level in nearly 20 years, and said the move initially pulled the yield down about 10 basis points and weakened the dollar. The firm argued that higher yields may no longer be reliably bullish for the dollar, with the dollar index around 99 and a potential path toward the low-to-mid-90s.
ETF Trends added that a weaker dollar could create a translation benefit for US investors holding foreign assets, but it also noted concerns about the broader cost of funding. Thornburg said it runs two international-focused ETFs tied to that shift, including the Thornburg International Equity ETF (TXUE), which had $557.1 million in assets and was up 14.4% year to date through September 2, with a 0.65% expense ratio and MSCI EAFE as its benchmark.
Latest closeDollar index 99.58 ▼0.1%