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Rob Cunningham | KUWL.show
@KuwlShow
Yen Carry Trade Fear Dissolved
How The Fed describes FIMA: foreign monetary authorities can temporarily exchange Treasury securities for dollars rather than selling those Treasuries into the open market. Its explicit purpose is to prevent foreign dollar-funding stress from spilling into U.S. markets.
Goodbye Yen Carry Trade Fear
The old nightmare feedback loop looked something like this:
Yen weakens sharply → Japan intervenes → needs dollars → sells Treasuries → Treasury prices fall/yields rise → global leverage tightens → investors dump risk assets → carry trades unwind → yen surges → more forced deleveraging → stocks/crypto/bonds get hit simultaneously.
That’s the chaos many feared.
FIMA inserts a circuit breaker into that chain.
Japan can take Treasuries it already owns, temporarily repo them to the Fed, receive dollars, and use those dollars for liquidity/intervention without first dumping the Treasuries into the market. The Fed gets Treasury collateral; Japan gets dollars; the Treasury market avoids potentially enormous forced selling.
OLD SYSTEM:
Japan needs $50B → SELL $50B TREASURIES → market absorbs the shock.
FIMA SYSTEM:
Japan needs $50B → PLEDGE TREASURIES → Fed provides temporary dollars → no equivalent open-market Treasury sale required.
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Source(s):
• https://x.com/KuwlShow/status/2107066499277967870
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