Here's a more detailed look at some of the overnight news that generally contributed to the minor uptick of "risk-on" sentiment. Current weakness feels like it's more about auction-prep and FOMC wariness, but this accounts for most of the overnight momentum, small though it may be...

(Reuters) - Borrowing costs for Spain and Belgium fell on Tuesday and the euro zone's rescue fund sold its first short-term debt although markets remained nervous as measures agreed by EU leaders failed to assuage fears that euro zone states will be downgraded.

The debt sales came after Monday's Italian auction at which Rome paid near record-high levels for one-year paper following a fiscal pact agreed at a summit on Friday that was seen as not bold enough to halt the debt crisis now in its third year.

Spain saw strong demand for its sale of 12- and 18-month Treasury bills, with bids of more than 18 billion euros for the nearly 5 billion euros of debt sold, but yields stayed painfully high as markets braced for threatened sovereign rating cuts.

Madrid paid less to borrow than at the last such sale in November, when yields leapt to a 14-year high, but levels were otherwise higher than had been seen at a comparable auction since 2007. Its benchmark 10-year bond fell in value in a sign that Tuesday's auctions had done little to alleviate concerns.

"While representing a clear improvement on the last auctions, today's yields remain elevated and hence, in terms of contagion risk, these sales represent a temporary stay of execution," said Richard McGuire, senior fixed income analyst at Rabobank.
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The US Census Bureau today announced the advance estimate of Retail Sales for the month of November rose 0.2 pct after rising 0.6 pct in October's final reading. Economists surveyed by Reuters expected today's report to maintain that +0.6 pct.

Core Retail Sales (which exclude autos, gas, and building materials) rose 0.3 pct versus a 0.7 pct in October.

MBS are starting out 5/32nds lower at 101-30 in Fannie 3.5's. 10yr Treasury yields are up about 3 bps at 2.047 and stock futures have clawed back about half of yesterday's losses. S&P's were at 1236 at 4pm yesterday and stand at 1242.25 at the moment.

We're not reading too much into overnight trading or events. Volume was really too light to justify that. Also, it's hard to say how much domestic bond markets are responding to European markets versus setting up for this afternoon's auction, or even just merely bouncing around aimlessly inside the range.

If someone was looking to chalk up overnight movement to market events, he/she might point out generally stronger short term Spanish debt auctions earlier this morning as well as the first short term EFSF auction--also slightly better than expected. But when you get to the heart of the matter, 10yr yields didn't move more than a bp on either of those events and German Bund yields fell back in line with their previous levels as well.

Retail Sales will hit presently (830am) and the afternoon is busy as well with the 1pm 10yr auction and the 215pm FOMC Announcement.