Fu Peng: US-Japan Joint Intervention Suppresses US Treasury Yield, Providing Valuation Support for Cash-Flow Strong Large Tech and AI Companies

BlockBeats News, August 20th – Fang Peng, Chief Economist of Xinhuo Group, pointed out that recently, the joint intervention by the US and Japan in the exchange rate preemptively dismantled the potential risk of Japan's large-scale selling of US Treasury bonds, preventing pressure on long-term US bonds. This has led to a doubling of the scale of long-term treasury bond repurchases, precisely targeting the summer short selling pressure, forcibly lowering long-term yield and term premium.

Fang Peng believes that the US-Japan intervention aims to avoid the debt interest rate spiral triggering a collateral liquidity crisis. The joint US-Japan intervention, coupled with hot money inflows, has pinned down the short end and artificially suppressed the long end, causing a significant flattening of the yield curve. The 10-year/30-year interest rates have been depressed, providing a valuation support for large cash-flow-strong tech and AI companies; at the same time, reducing the attractiveness of overseas covered interest rate arbitrage trades, weakening overseas appetite for long-term US bonds.