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Turning Japanese
- This past week, the US Treasury announced that it would at least double its liquidity buyback operations for longer-dated Treasury bonds
- The size of the liquidity support announced is a highly unusual move by the US Treasury, somewhat akin to the activist policies of the Japanese authorities to support their bond and currency markets.
- This saw the Fed’s balance sheet expand sharply, with a further leg up during the pandemic in 2020.
- Indeed, this action can be seen as the second leg of recent interventions, the first being the joint intervention with the Japanese Ministry of Finance in the currency market to prop up the yen a few weeks ago.
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