Bessent Pushes Fed to Boost Foreign Lending Facility Amid Yen Intervention

U.S. Treasury Secretary Scott Bessent recently called on the Federal Reserve to expand its Foreign and International Monetary Authorities repo facility, which lends cash to official foreign accounts in exchange for U.S. Treasuries as collateral.

The FIMA facility allows foreign authorities to access up to $60 billion in short-term funds, but has seen very limited use outside of a brief surge in borrowing during the collapse of Silicon Valley Bank in March and April 2023.

Bessent's request, made on social media, aims to allow Japan to fund yen purchases without having to sell its existing Treasury holdings, which could be beneficial for the U.S. government facing rising longer-term Treasury yields due to inflation concerns and growing debt issuance.

However, some market watchers caution that upsizing FIMA may be more about signaling resolve on currency intervention rather than providing actual help to Japan, which has other channels to deploy dollars.