I disagree.
> I'm really confused why you are bringing it up, TBH. And neither do Japanese Government Bonds. Or the ECB.
howmayiannoyyou mentioned "The real one, the one represented by offshore US dollar denominated financial products (eg. Eurodollars, US denominated foreign debt), and domestic financial products (eg derivatives, Corporate bonds)."
The former is encompasses the latter.
All these markets and participants are all interconnected, and alot of their interconnections lie outside of any particular jurisdiction. One would be fooling themseleves if one thinks lines on maps demarcates clear boundaries for the actors, assets and financial arrangements in the space.
> FYI, yes, in order to promote financial stability in eurodollar markets, central banks can arrange mutual swap lines
Swap lines from various actors have existed long before CB swap lines. They wont help with long term issues with counterparty risks, and the quality of collateral (and the rehypothication of such) that cant be papered over for "financial stability"; trying will only guarantee more lack of such "financial stability" in the future (Jerome Powell called the post 2008 global bailout regime in 2012 the "duration bubble" [0, on page 193 of the transcript from the October 2012 FOMC meeting], still being blown larger and larger today).
> but again this has nothing to do with how the US regulates American banks. Europe can regulate European banks however it wants. If the result leads to some eurodollar funding issue, then we can bail them out with a swap line if we want, or not bail them out if we don't want.
If the regulators fail to understand the interconnectivity that happens outside of their jurisdiction and off the balance sheets of the actors (not just banks), then that can mean such regulations mean nothing beyond the paper they are printed in or even worse, failure to understand the consequences of any regulations.
[0] "Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum. You can almost say that that is our strategy."