Signs that Japan has intervened in the yen for the second time in a month has Wall Street once again wondering how Japanese authorities are funding dollar sales and whether that may fuel more volatility in the Treasury market.
There is speculation from analysts that Japan’s Ministry of Finance sold securities to fund the intervention as Japanese authorities did in September. Until two weeks ago, foreign central banks had been shedding their holdings of US Treasuries, which suggested the country's institutions were selling bonds to stockpile cash.
There is also the possibility the Bank of Japan drained ready funds parked at the Federal Reserve’s foreign reverse repurchase agreement facility.
“The worry is that even if the BoJ has cash for intervention now, the rate at which they are intervening will require them to sell more Treasuries for future interventions,” said TD Securities strategist — Goldberg.
“That’s really what’s driving the fear.”
Treasuries cheapened in early trading on Friday, with yields soaring across the long-end and spreads steepening, as traders braced for potential Japanese intervention as the yen extended past 150.
The Ministry of Finance disclosed last month that it spent ¥2.84 trillion ($19.7 billion) in September to slow the yen’s slide in its first intervention to support the currency since 1998. Some analysts had estimated the intervention at up to ¥3.6tn.
Wall Street strategists initially assumed Japan removed cash from the Fed. After all, the island nation has historically been the largest user of the foreign reverse repo pool, with an estimated more than $110bn of cash there, data showed.
Instead, the Ministry of Finance’s foreign reserves for September showed securities were worth $985bn from $1.037tn the prior month, while deposits were little changed, an indication Japan sold holdings to finance its intervention.
More recently, though, foreign central banks replenished their Treasury holdings at the New York Fed for the second straight week, with the total rising $6bn through the week ended October 19 after rising by $11bn the prior week. By comparison, official holdings of Treasuries fell by $82bn in the six weeks ending October 5.
Meanwhile, foreign central banks stashed $330bn at the Fed’s reverse repurchase agreement facility, according to data for the period through October 19, down from a record $333bn a week earlier. That is still $55bn above the year-to-date average.
Data next week on Treasury holdings and cash held at the Fed’s foreign repo facility may provide more insight into fund flows and source of funding that immediately preceded the intervention.
The Fed’s creation of a reverse repo facility that is accessible by foreign central banks means that international monetary authorities such as the BoJ can keep a big chunk of their cash there earning interest instead of in Treasury bills and other securities.
And when they need to do something with those dollars, they can just withdraw funds from the facility without ruffling markets.
RACE RESULTS
1. Valtteri Bottas (FIN/Mercedes) 1hr 21min 48.527sec
2. Sebastian Vettel (GER/Ferrari) at 0.658sec
3. Daniel Ricciardo (AUS/Red Bull) 6.012
4. Lewis Hamilton (GBR/Mercedes) 7.430
5. Kimi Räikkönen (FIN/Ferrari) 20.370
6. Romain Grosjean (FRA/Haas) 1:13.160
7. Sergio Pérez (MEX/Force India) 1 lap
8. Esteban Ocon (FRA/Force India) 1 lap
9. Felipe Massa (BRA/Williams) 1 lap
10. Lance Stroll (CAN/Williams) 1 lap
11. Jolyon Palmer (GBR/Renault) 1 lap
12. Stoffel Vandoorne (BEL/McLaren) 1 lap
13. Nico Hülkenberg (GER/Renault) 1 lap
14. Pascal Wehrlein (GER/Sauber) 1 lap
15. Marcus Ericsson (SWE/Sauber) 2 laps
16. Daniil Kvyat (RUS/Toro Rosso) 3 laps
The specs: 2019 Infiniti QX50
Price, base: Dh138,000 (estimate)
Engine: 2.0L, turbocharged, in-line four-cylinder
Transmission: Continuously variable transmission
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Fuel economy: 6.7L / 100km (estimate)
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- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
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- Specialist robotics and science laboratories
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- Disruption Lab and Research Centre for developing entrepreneurial skills
Biog
Mr Kandhari is legally authorised to conduct marriages in the gurdwara
He has officiated weddings of Sikhs and people of different faiths from Malaysia, Sri Lanka, Russia, the US and Canada
Father of two sons, grandfather of six
Plays golf once a week
Enjoys trying new holiday destinations with his wife and family
Walks for an hour every morning
Completed a Bachelor of Commerce degree in Loyola College, Chennai, India
2019 is a milestone because he completes 50 years in business
UAE currency: the story behind the money in your pockets
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
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Get inspired
Here are a couple of Valentine’s Day food products that may or may not go the distance (but have got the internet talking anyway).
Sourdough sentiments: Marks & Spencer in the United Kingdom has introduced a slow-baked sourdough loaf dusted with flour to spell out I (heart) you, at £2 (Dh9.5). While it’s not available in the UAE, there’s nothing to stop you taking the idea and creating your own message of love, stencilled on breakfast-inbed toast.
Crisps playing cupid: Crisp company Tyrells has added a spicy addition to its range for Valentine’s Day. The brand describes the new honey and chilli flavour on Twitter as: “A tenderly bracing duo of the tantalising tingle of chilli with sweet and sticky honey. A helping hand to get your heart racing.” Again, not on sale here, but if you’re tempted you could certainly fashion your own flavour mix (spicy Cheetos and caramel popcorn, anyone?).
