Yesterday's rally combined with some correction for the buying focus from Monday (month-end buying) introduced a selling bias in bond markets. That was mostly imperceptible in yesterday's price action, but as far as warm bodies, there were 3 sellers for every 2 buyers in the long end.

Things weakened for bonds, almost 100% in concert with things strengthening in stocks--a solid suggestion that "risk-on" is merely taking back a nominal bit of ground from the "risk-off" sentiment that pervaded yesterday's session. But with 10yr yields still under 2.05 and Fannie 3.5's at 102-01, the broader shift in favor of "risk-off" definitely remains.

With production MBS down only a quarter of a point at the moment and benchmark TSYs holding their ground, the damage to rate sheets this morning should be contained, but can vary due to pipeline control considerations depending on the lender.

As long as EU tape bombs stay at bay, we're only 3 hours and change away from the FOMC announcement, which should be the highlight of the day. Don't forget that today is one of the press conference days so the announcement itself will be at 12:30 with the press conference at 2:15pm.