As we’re pushing out rates this AM, there are some major moves underway in both bonds and equities. 10yr Treasuries slipped to a record low at 1.66% and the Euro weakened to a two-year low after an Italian debt auction failed to hit its target. As a result, credit spreads on Italian bonds are experiencing a massive blow out with 5yrs wider by 45bp and 10yrs by 28bps. Market sentiment took a further hit last night after the ECB rejected a Spanish plan to recapitalize its banks. Yields on debt from Spain have also blown out 25-35bp. US bonds are rallying this morning, with mortgages following suit. Fannie 3.5s are currently up 12 tics. Equities are getting hit today with the DOW and S&P both down, 128pts and 10pts. In addition to the deteriorating EU situation, we also have month-end tomorrow and NFP on Friday to contend with.