Post by Augustine Chiagozie (@pabloexchange)

First the US bought yen. Now the Treasury wants the Fed to pay for the defence.

What's happening:

🛍Friday: the US bought yen with Japan, first time since 1998

🛍 Sunday: Bessent publicly asked the Fed to upsize its foreign repo facility

🛍 Monday: Japan said it will draw that facility to fund intervention

Why it matters:

📊 Japan's reserves are $1.1T of US Treasuries

📊 Selling them to fund the defence would hammer the bond market

📊 The Fed tool lets Tokyo borrow dollars against them instead

The catch:

❗ The $60B cap needs FOMC approval to lift

❗ A 2020 emergency tool is becoming intervention plumbing

❗ Warsh must decide where the Fed's line sits

Washington isn't defending the yen. It's defending its own bond market.

First the US bought yen. Now the Treasury wants the Fed to pay for the defence. What's happening:...

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