Rally On: The dollar was well bid through the session, with the index ticking up to the best levels since the payrolls number, notching a high just under the 80.89 point, the highest since June on a closing basis, as the euro tumbled to its worst since the start of the month. The surprise rate hike out of India on top of the ongoing problems in Greece helped fuel dollar buying. The euro was dropped to trade just over the 1.35 handle on the buck and the lowest in 8 sessions on the yen, but was able to rebound some as assurances the Union will assist Greece. "European Commission President Jose Manuel Barroso said during an interview with French radio channel France 24 to be broadcast Saturday that euro-zone countries, including Germany, would be ready to extend aid to Greece if asked," (WSJ). Talk of a discount rate hike is still making its way through the markets, but one long time dealer noted that such a move was unlikely before the end of the month (about the same time they will be halting the mortgage related buying programs). The pound also got hit across the board, ticking off to the week's worst levels, flirting with the 1.4935 point on the buck, and as officials fretted over growth. The yen was wound better as safety buying brought it back from near the week's weakest, to stall near 90.40 while working to give up 122.26 per euro from 125.30 mid-week.. Gold got clocked, trading back to the week's lows, with spot 1106.50 (-20.85) as the dollar bounced. Commodities were generally offered with crude settling 80.68 (-1.52 spread 0.29).

Backed Off: The long end is keeping things afloat, while the drag on the shorter maturities has some basis in the 2-to-7-yr supply on tap. The Indian rate hike and the potential for (talk) of a move higher on the discount rate "to more normalized level," have helped keep a lid on prices. 

Basketball Diaries: Players report the combination of the NCAA, expirations and decent weather has sucked the life out of trade, with the market looking out to supply next week. Treasury will be offering $28 bln 3-mos and $29 bln 6-mos Mon, $44B 2-yrs, Tues, $42B 5-yrs Wed, and $32B 7-yrs Thurs, all hitting in a very crowded environment. The long end continues to get some safety bid while the inflation picture remains tame. The curve will likely continue to flatten as price pressures stay low.

Bid: The dollar has been flying as the market looks to take out the 1.35 on the euro with a little support near the 1.3475 area. The problems with Greece remain an issue and the market will not let it just ride on lip service alone. Technically the dollar index should see some added bounce, with the next stumbling point near 80.93. The euro has been run back to the lowest level since the start of the month on the buck and the worst in 2 weeks on the yen. Trade is leaning toward safe-haven buying with the yen and Swiss and the buck, in general, with any positive sentiment on Greece losing steam. The yen has been seeing some small short coverage, but remains near the worst levels in a month, but should stay anchored to 90.50 for the near term as it clings to the safety buying. Gold is getting crushed as the dollar ramps up, with spot 1106.05 (-21.30). Crude has also gotten drilled lower as the buck rallies, with the front month trading under 80, now 80.17 (-2.03, spread -.28 )

Weighed: Treasuries got knocked off with better data, chatter over eventual rate hikes and global supply. The data painted an improving picture with the Philly Fed headline looked better (but the details, not so much0 while jobless claims improved (but not the continuing measure). Trade was led by the mid-curve with the market looking out to the latest batch on auctions with at-record sized offerings hitting next week. Treasury announced $28 bln 3-mos and $29 bln 6-mos Mon, $44B 2-yrs, Tues, $42B 5-yrs Wed, and $32B 7-yrs Thurs hitting in an increasingly crowded environment. LIBOR continues to edge higher as the market leans toward eventual, someday, higher rates. The Fed bought $10 bln agency MBS over the past week, ended Wed, as they near their deadline and their $1.25 bln total ($1.236 bln so far). The curve was able to pull back from the flattest levels on the year with the 2-10-yr yield spread running 270.8, and may see some squaring Fri. The buck was able to grab a bid, but couldn't hold the best levels in a week while the euro continued to get pressure as Greece remains a slippery issue. There is no data or Fed-speak Fri, but Greenspan is supposed to be chattering.