Yen Intervention Sparks Concerns Over Link to US Treasuries
The recent Japanese yen intervention has sparked a link to US Treasuries, according to analysts. The move has eased higher rates pressure in the US, but this relief may be short-lived as real yields remain high and fiscal numbers are slipping.
A key factor is the Bank of Japan's policy rate, which remains too low, contributing to yen weakness and elevated long-dated yields. Rate hikes could ease this tension, but would also have economic implications. It's a choice between protecting the yen or not.
The Treasury Secretary's recent intervention, which saw the sale of euros to buy yen, is seen as unusual and may be linked to concerns about the impact on US Treasuries. If further intervention is entertained, it could lead to negative feedback loops into US Treasuries, potentially impacting prices.