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USD/JPY: Dollar unfazed by in-line two year auction – MarketPulse


  • Two-year auction demanded a 5.055% yield, lower than prior auction yield of  5.085%
  • Bid-to-cover 2.64x vs 2.73x prior (lower than 1-year average)
  • Flattening trade remains: 2-year yield +3.2bps; 5-year +0.2bps; 10-year -1.9bps; 30-year -2.7bps

With US debt becoming a focal point for traders, Wall Street is now paying close attention to Treasury auctions. The early afternoon two-year Treasury auction went relatively smoothly.  Demand came in-line with the 1-year average with this breakdown: indirects (62%), directs (20.3%), and dealers (17.6%).  Tomorrow’s 5-year note auction might see a bigger reaction given the rising uncertainty the longer you go on the Treasury curve.

The inverted yield curve is disappearing and that might mean bad news for the economic outlook. This recession indicator is getting close to uninverting, which means the housing market will remain in trouble as mortgage rates remain high and it will cost more for businesses to get loans.

10-year to 2-year Treasury Yield Spread Chart

The dollar is holding onto its earlier gains in the session and still remains steadily below the 150 level against the dollar. FX traders are awaiting the November 1st BOJ policy decision that could see a tweak to its current yield curve control program.  If Treasury resume skyrocketing move higher, the BOJ will be pressured to allow Japanese yields to move higher.  The BOJ isn’t quite ready to end negative rates, but if Tokyo inflation comes in hotter, we could see build for a hike at the next couple of meetings.

USD/JPY  5 minute chat

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

Ed Moya

Ed Moya


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