US Bond Market Vulnerability Gives China Leverage in Trade Talks

The recent joint market intervention by the US and Japan to prop up the value of the Japanese Yen has raised eyebrows globally.

This uncommon move, which last occurred during the Asian Financial Crisis in 1998, involved the New York Fed selling some of its Euro reserves to buy Yen on July 31st.

The mechanics of this transaction have sent a signal that market participants are interpreting as an implicit US involvement aimed at ensuring the stability of the US bond (treasury) market.