US 2-Years Better Bid at Auction

The markets interpretation of how dovish Bernanke’s employment speech was yesterday provided for a strong 2-year US auction this afternoon. Despite the US Treasury selling 2-year notes at the highest yield since last July, the +0.34% yield was below the market rate at time of sale. With consumer confidence dipping and home prices falling earlier this morning was always going to provide a better bid for product at time of auction. Today’s Treasury sale is the first of three offerings this week totaling $99-billion in 2’s, 5’s and 7-year notes.

Direct bidders took +21.4% of the +$35-billion sale, matching the highest proportion in almost two years. Indirect bidders took down +34.3%, above the +33.1% recent average. The bid-to-cover ratio came in at 3.69. Up until now, investors have been wavering about whether policy makers were going to provide more stimulus for the US economy. Bernanke’s cautious comments has since revived expectations, again boosting the appeal of US treasuries.

Earlier this morning, the Fed bought Treasuries due from February 2036 to May 2041 under Operation twist. Under this plan to sell short dated notes by purchasing longer dated securities, policy makers hope to push longer dated yields lower for consumers and business to facilitate economic recovery.

Economic Indicators“>

Other links:
EUR Positions Remain Offside

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell