Euro remained at the forefront as Greek bond yields backed up to fresh near-term highs. We continue to maintain that the problems in the Eurozone periphery are secular in nature and will not be resolved by any stretch of the imagination in the short-term. The ECB press conference in early NY tomorrow will be the next chapter in this drama and we expect Trichet to get peppered with questions regarding the fiscal difficulties in the region. The overnight upside should continue to find better selling interest ahead of 1.3400 now while 1.3300/1.3270 are the next major levels of contention to the downside.

The other main theme in yet another slow data day was the impressive 10-year Treasury note auction. In what was a mirror image of the late March ugly auctions, the 10-year was seemingly bought hand over fist. The bid/cover was an extremely robust 3.72 while indirect bidders (foreign demand) took more than 40% of the offering. The positive auction coupled with an outright rejection of the 4.0% level in rates on Monday elicited another squeeze lower in yields. Not surprisingly this sent USD/JPY to session lows near the 93.15 area and we probably do not need to remind everyone that these two assets have moved in tandem better than 90% f the time this year. Expect nothing to change on this front.