Evercore ISI says prolonged use of Fed repo facility could test resolve on yen

Evercore ISI said prolonged use of the Federal Reserve’s repo facility for foreign and international monetary authorities could invite markets to test how firmly the United States and Japan are prepared to defend the yen, according to Jin10, as cited by ChainCatcher. The facility allows overseas institutions to obtain U.S. dollar funding by posting U.S. Treasuries as collateral, with a daily cap of $60 billion for each counterparty. Evercore strategists said that ceiling is only slightly above the size of Japan’s single-day foreign exchange intervention last Thursday. They also stressed that the facility was built as a short-term liquidity backstop rather than a lasting source of financing. The remarks focus attention on how official funding channels may be interpreted by markets if they are used beyond their intended short-term purpose.