Wednesday's FOMC statement will include the perspective of 3 new voters: Charles Plosser, Richard Fisher, and Charles Evans. The FOMC statement will however not include the much publicized dissenting/hawkish view of Thomas Hoenig. Even with Hoenig gone, this annual rearrangement of FOMC voters shifts board room sentiment in a hawkish direction. Read hawkish as a bias toward higher interest rates.

There is a distinction between inflation/overstimulative related hawkishness and the sort of hawkishness pertaining to an improvement in the broader economic outlook. The former is less of a hot-topic among new voters as each has noted varying degrees of nonchalance about inflation.

On the state of the economy and the Fed's involvement in it however, these new voters could be the forewarning of a potential shift in verbiage. In saying "it would not break my heart" if the Fed was mandated only with controlling inflation. Richard Fisher implicitly supports a decrease of Fed involvement (QE). Plosser, though not worried about inflation, made several hawkish comments recently, including the notion that he didn't rule out a rise in rates this year and several iterations of his thoughts on decreasing the Fed's QE role. Less hawkish than the other two, Charles Evans remains a bit of a wild card, but he is on record as being optimistic that the economy is strengthening and as being open-minded about potential policy adjustments.

In a market that has lacked directional passion of late, and indeed that has been range-bound and waiting for motivation to release that energy, the one-two punch of tomorrow's state-of-the-union address, combined with what could potentially be a new and different voice from the FOMC on Wednesday, could be more than enough for a test of the upper limits of the range (3.5's in 10yr notes). It would then be imperative to see strong real money support at those wides during this week's auctions if these two headline events are not to be the beginning of the end for the long-standing range.

High-Risk Events Ahead! The silver-lining is that the SOTU shouldn't have the bite, in and of itself, to make the sky fall, though it does have the potential to make Wednesday morning's rates a lot worse than today's.

Read more about the importance of events in the day's ahead....Potential Range Breakers: State of the Union Address & FOMC Meeting

Quick Market Update....

Earlier today we noted in an MBS micropost...

3.4319 and 3.3946 (call it 3.43 to 3.40) mark a range that has contained 10yr notes so far this morning. FNCL 4.5's continue to favor the frequently visited 102-04 price level. The yield highs in 10's this morning at 3.43 in correspondence with the lows at 3.40 line up with highs and lows from the 21st to form a trend channel DOWN in yield.

And slightly later in the morning...

After the conclusion of the open market operation Fed Buyback, yields moved slightly higher, but thus far have gone no higher than the lowest yields seen on the 21st. This is a promising pivot point from which to begin the week

See the chart below to see how both of these trends have played out today.  Indeed the pivot point (teal line) has held, while the trend channel (red lines) continues to offer nominal resistance to an otherwise moderately bullish 10yr note trend channel.

MBS haven't rallied quite as directionally as their treasury benchmarks, but are in the green for the most part...

If the trend channel our directional guidance giver is following holds stready, we are due a move back toward 3.40% and a dip in MBS prices. Nothing terrible though...don't panic until the originator friendly trend channel is broken.