The NY session saw Euro continue to trade with a very weak tone as fresh problems in the debt burdened country of Greece weighed on the common currency. Officials of the peripheral country are starting to suggest some hesitation with respect to taking IMF aid and this stems from the notion that the conditions imposed by the global lender of last resort would be too much to bare and politically unpalatable. EUR/USD continues to be sold on rallies as it tries to make its way back above the 1.3400 mark - significantly off the intraday highs near the 1.3540 zone. To illustrate how acute the problems in the Eurozone periphery have become once again, all one has to do is look at Greek sovereign debt. The paper traded with a decidedly offered (sold across the board) tone and the 10-year backed up more than 60 basis points to 7.15% highs intraday. Consider that April will be a very telling month in terms of what appetite for this paper (and indeed confidence in the Euro) looks like. The problems are likely to only worsen into the midpoint of 2010 and the path of least resistance in EUR at the moment still feels decidedly lower.

The main events in an otherwise quiet session for economics were the US 3-year auction and the Fed minutes from the latest meeting. The auction was well received (especially compared with the ugly outcomes in late March) as the bid/cover printed a smart 3.10 while foreign investors took more than 52% of the offering. What's more, the yield printed just 0.3bps above where the market stood at the time and this suggests participants demanded less of a premium to hold US debt. The recent 5- and 7-year auctions had seen tails of about 5.0bps by comparison. The FOMC minutes were more dovish at the margin and this elicited somewhat of a late session squeeze lower in the US dollar broadly. The main takeaway was the statement that the risks of raising rates too soon outweigh those of raising too late at this point. This is in line with our expectations of a Fed rate hike by 1Q 2011 at the earliest, but throws some cold water on the market's guesstimate of a late 3Q 2010 increase.