History was made on Wednesday as the US Treasury assigned it's first ever 1.75% coupon to a 10yr Treasury auction.  That's more of a piece of water-cooler trivia than anything as it simply means that 1.75% was the next lowest eighth of a point from the auction's stopping yield of 1.855%.  Did you know: it's called the "stopping" yield or "the stop," because Treasury accepts bids at the lowest yields first (naturally, they want to pay the lowest amount of interest that investors are willing to accept), thus the auction must necessarily "stop" when the highest yielding bid(s) finally soak up the amount of issuance.

Despite the record-setting 10yr auction, the more interesting record-breaking performance of the day was in European Benchmark debt, where German Bunds fell to a record low of 1.498%!!!!  Before April of this year, their lowest trade was 1.636%.  To an even greater extent than US Treasuries, German Bunds are the barometer of Euro-drama.  The lower the yield, the worse things are.  So with Greece potentially right back where they started (elections threatening to undo all the bailout efforts almost overnight -- read more...) and Spain increasingly eyed as the "next Greece" (read more...), it's not really much of a surprise to see records being broken.  

So we've basically unwound Greece back to panic mode and added the much bigger consideration of Spain.  It's all very ugly, and more than today's US Treasury auction, more than the limited, insignificant data this week, and more than last Friday's NFP, this Euro business is the stuff keeping domestic yields down.  Thanks, we think.... 

It's too bad that the Euro-zone situation continues relatively unabated into today considering that there is actually a decent amount of not-insignificant economic data as well as the last of the week's Treasury coupon auctions.  While we do think that markets will be much more willing to react to this morning's 8:30am data trio (Jobless Claims, Import/Export Costs, and Int'l Trade) and 1:00pm's 30yr Bond Auction, we can't help but expect a somewhat muted reaction to all of the above thanks to Europe.

Don't get us wrong, Europe isn't the only component in the low-rate equation, just the biggest.  Other notable events today include Bernanke at 9:30am and the MBS Roll after the close tonight (in other words, don't be surprised to see a quarter of a point or so missing from Fannie 3.5 prices first thing tomorrow morning.  Of course, that won't be a real loss, but simply a movement in the looking glass as we shift our primary focus from May coupons to June's)