Treasury's Stealthy Moves Spark Fears of Dollar Devaluation

The US Treasury Department has made moves in the bond and currency markets that some experts are calling 'soft-form financial repression.' The term refers to policies that keep interest rates artificially low by influencing financial markets. In recent weeks, the Treasury has increased buybacks of long-term bonds, after the 30-year yield hit its highest level in nearly 20 years.

This move is part of a larger trend. Just weeks ago, the US and Japan took joint action to boost the yen for the first time in three decades. To do this, the US sold euros instead of dollar-denominated assets, avoiding a sale of Treasury securities that would have put upward pressure on yields.

The head of FX research at Deutsche Bank, George Saravelos, says both moves are aimed at containing the long-end of the US yield curve. He warns that suppressing US Treasury yields will merely shift the impact to the dollar.