Overview
- Treasury Secretary Scott Bessent publicly asked the Federal Reserve on Tuesday to increase the Foreign and International Monetary Authorities (FIMA) repo cap after a coordinated U.S.-Japan operation to buy yen days earlier.
- FIMA lets foreign central banks temporarily swap U.S. Treasuries for dollars under a per-institution cap of $60 billion for very short repos, typically up to seven days.
- Bessent and some analysts say a larger FIMA would allow countries such as Japan to fund currency support without selling portions of their roughly $1.14 trillion in U.S. Treasuries, which could reduce upward pressure on long-term yields.
- Other market watchers warn that publicizing and enlarging the facility could invite markets to test U.S. and Japanese resolve, add to the Fed’s balance-sheet while it seeks to shrink its market footprint, and would require a majority vote of the 12-member FOMC.
- Analysts say the move would change global dollar liquidity and could boost risk assets including crypto if it prevents forced Treasury sales, but inadequate capacity in a stress event could instead trigger rapid Treasury sell-offs and tighter financial conditions.