Evercore: The Federal Reserve's "offbeat" liquidity tools may alleviate the pressure from Japan's selling of U.S. Treasury bonds, but long-term use could test the resolve of the markets regarding U.S.-Japan intervention.

Evercore ISI's latest report reveals that a rarely used liquidity tool by the Federal Reserve, the Foreign and International Monetary Authorities Repo Facility (FIMA Repo Facility), could help Japan avoid large-scale selling of U.S. Treasury bonds when intervening in the currency market to support the yen. However, the institution warns that long-term reliance on this tool might instead invite the market to test the resolve of both Japan and the U.S. in maintaining stable exchange rates.