The central banks auction off bonds to raise cash. For example, the Fed announces to auction off bonds like Treasuries with different maturity periods. The potential buyers of these bonds are hedge funds, pension funds, etc.
When there are more investors for buying these bonds than the amount offered by the central bank, this is called as oversubscribed auction. It is considered as a successful auction by the central bank. When there are less bids from investors compared to the amount offered by the central bank, then it is called as an undersubscribed auction.
The oversubscribed auction results in more demand for bonds, which means higher prices for bonds. It pushes the yields lower as the bond prices rise. The central bank has to pay less interest on bonds when they sell. In this case, the buyers of the bonds have to pay in US dollars. It results in the appreciation of the US dollar in value. However, the undersubscribed auction is considered dollar negative. You should keep these things in mind before making a trading decision.
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