After coming in the door slightly better than yesterday, bond markets took a relatively abrupt turn for the worse--one open to a bit of speculation as to causality.  The most popular "guess" was a CNBC appearance by Bill Gross, but there are other important considerations.  Here's a good recap from Reuters, touching on all of the above.

Bond yields rise as traders fear more hawkish Fed: (Reuters) - U.S. Treasury yields rose on Tuesday before the release of minutes from the Federal Reserve's March meeting, which investors see as likely to reflect a more hawkish tone from the U.S. central bank.  The debt also weakened, erasing earlier gains, after PIMCO Chief Executive Bill Gross said on CNBC that Treasuries are unattractive at current yields.  Rumors that the Federal Reserve was conducting a reverse repurchase agreement in an attempt to ease a squeeze in short-term rates may have also weighed on the market, traders said.  According to the New York Fed's website, the Fed had not conducted any reverse repurchase operations on Tuesday. Typically, such operations are undertaken in the early afternoon, and the details are posted on the New York Fed's website.  "Gross was quite bearish on the bond market, he thought Treasuries were completely overvalued and the market made a u-turn while he was speaking," said Tom Tucci, head of government bond trading at RBC Capital Markets in New York.

This story definitely moves the needle from a P&L point of view...

MONEY MARKETS-FDIC fee roils repo lending market (Reuters) - A scarcity of short-term Treasuries roiled debt markets for the third day on Tuesday, with rumors the Federal Reserve will step in to ease the supply shortage also hurting longer-dated Treasuries. A new charge on banks that lend overnight funds to the Federal Reserve has led some firms to step out of the market, exacerbating already low supply of short term bills that are used to back borrowing.  The new levy by the Federal Deposit Insurance Corp (FDIC) comes at the same time as remaining debt from a $200 billion short-term Treasury supply program rolls off. The U.S. government is unable to implement a new program until Congress raises its debt ceiling, which is not expected until next month.  The cost of general collateral in the repurchase agreement market is trading at zero and some issues are trading at negative rates, meaning that investors are effectively paying to lend money to banks in order to obtain the bills.

Here's the net two-day effect on MBS.

The losses seen have already resulted in reprices for the worse....

FOMC Minutes due at 2pm.

Reuters VIDEO: A flurry of Fed activity is about to unfold, starting when the Fed releases minutes from the March 15 meeting – when the Federal Open Market Committee sounded more confident about the recovery’s strength -- and may cast more light on how hard some on the committee are pushing for a scaling-back of support. Those minutes, along with the two Fed officials scheduled to speak the same day, will be perused by analysts seeking to figure out whether the Fed hawks are simply talking tough on inflation to keep price expectations in check, or whether the start of a tightening cycle might be approaching (1400 ET/1800 GMT).

Here's the net two-day effect on MBS.