Fed May Upsize FIMA Facility Amid Growing Bond Market

US Treasury Secretary Scott Bessent has suggested that the Federal Reserve consider increasing the size of its FIMA (Foreign and International Monetary Authority) facility. This stopgap liquidity facility was created in 2020, but since then, the bond market has grown significantly.

Bessent argued that it would be reasonable for the Fed to upsize the facility given the increased size of the bond market. He also noted that the FIMA facility is designed to protect the US economy from volatility and prevent it from affecting domestic shores.

The Japanese government has expressed interest in using the FIMA facility to support the yen, and Bessent confirmed a joint US-Japan intervention last week. He emphasized that the facility is secure and similar to swap lines, where countries post collateral and receive loans to intervene in their markets.