It's tough to put into words how big and difficult-to-explain the moves at the front end have been yesterday and today.
CPI was hot yesterday and US 2s moved up to 4.39% from 4.33% but within hours that was erased. Later yesterday, yields fell further, presumably on slightly-dovish Fed comments and worries about Yemen strikes. Today, the bottom has fallen out with 2s down an additional 14 bps to 4.12%.
To put that into perspective, three-month t-bills are yielding 5.36% (right between the Fed's target of 5.25-5.50%. You can roll that all the way out. In order to do better in 2s, you would need considerable Fed rate cuts on the back-half of the two-year period.
I find it difficult to explain this move and why the March Fed is now +90% for a cut with 169 bps priced in this year (up from 136 just after CPI).
In any case, the drop is certainly negative for USD/JPY and that's what is unfolding.
