U.S. Treasury Secretary Scott Bessent signaled a firm resolve to push the yen higher, while defending a planned expansion of Treasury buybacks as a step to cool an overheated government bond market.
Speaking at an event at Southern Methodist University in Texas on the 8th, Bessent said he is now "the house" and knows "quite well what the Japanese government and the Bank of Japan will do, what Japanese policymakers will do" when intervening in the yen, according to Bloomberg. "If you want to bet against me, go ahead," he said. The term "house" refers to a casino dealer, reflecting his confidence that he is not an ordinary investor but a player with more information who can shape the market.
He added that whenever people say the Treasury secretary is taking risks, that is the situation he had dreamed of, because he has asymmetric information. Bloomberg said the remarks show Bessent is involved unusually deeply in the economic policy of Japan, the largest foreign holder of U.S. Treasuries. The yen strengthened to around 152 per dollar that day, and market participants see a strong chance it will move below 150 by year-end.
A day before the announcement of the buyback size, Bessent defended the plan, saying the expansion is intended to take the "heat" out of the market. The Treasury Department said on the 19th of last month that it would at least double buybacks, which had been conducted at $2 billion per operation. The results of the 10-year Treasury auction reflecting the buybacks will be released around 3 a.m. on the 11th, Korean time.
Still, with the 10-year Treasury yield climbing to 4.79% that day, some argue the flagged $4 billion in buybacks is not enough. Analysts at RBC Capital Markets said a buyback of $4 billion would likely be seen as a disappointment by investors and could trigger a rise in long-term yields, assuming $5 billion to $6 billion as their base case, according to The Wall Street Journal.
