The US Treasury and the Bank of Japan just teamed up to support the spiraling decline in the Japanese yen. If you’re wondering why in the world the US would try to police the currency market, look no further than the Treasury market, says Carley Garner, senior commodity market strategist and broker at DeCarley Trading.
Looking at a daily chart of the yen and the 10-year Treasury Note side-by-side, it is clear that Treasuries sell off prior to large spikes in the yen. This isn’t a coincidence. Instead, it is the systematic liquidation of US Treasuries held by Japan, the largest sovereign holder of US debt, to raise cash to purchase yen in hopes of stabilizing the currency.
(Editor’s Note: Carley will be speaking at the 2026 MoneyShow Masters Symposium San Francisco, scheduled for Aug. 25-28. Click HERE to register.)
Japanese Yen Vs. 10-Year Note Futures
A daily bar chart with both the yen futures contract and the 10-year note future reveals an obvious pattern of Treasury selling in the days and weeks ahead of BOJ attempts at currency interventions to stabilize selling in their currency.
The first occurrence in this chart has not been officially confirmed, but at the time the Bank of Japan was jawboning an intervention by merely threatening the market. In anticipation of the intervention, traders sold Treasuries and bought the yen.
That trick only works once, and they knew it. The next intervention aimed at stabilizing the yen took place in late April and extended into May. The most recent began on July 30 and ended with a coordinated yen-buying spree with the US Treasury Department to catapult the currency from 40-year lows.
I suspect Treasury Secretary Bessent opted to participate in the “yen-tervention” in hopes that backing from the US would alter market sentiment and deter Japan from continuing to liquidate its investments in Treasuries, a process that has helped exacerbate higher interest rates.
Whether or not the BOJ, in coordination with the US Treasury, is successful in turning the tide in the currency market will matter greatly for US traders. If they are able to save the yen, they will also save the Treasury market. Of course, failure of the operation would highly likely result in elevated US interest rates and bond market turmoil.
