"Things were fairly flat for most of the overnight session, and 10yr notes got as low as 1.99's earlier in the morning when the potential inability of Greece to reach workable bond swap deal with private investors and the IIF was center stage. Things changed course a bit when a German official announced that Germany is discussing running the EFSF and ESM simultaneously. This started some downside momentum in bond markets that hasn't really stopped until moments ago when 10's topped out just over 2.06. Fannie 3.5's are down only 3 ticks to 102-19, a well-traveled pivot point for MBS. It's still not clear if the morning weakness has run its course." -MBS Live

There are no significant scheduled economic reports today.  The same is true for Tomorrow, except that it marks the inception of the 2-day FOMC festivities and also hosts the first of the week's three Treasury Note Auctions.  Although we do keep the 2yr note on our economic calendar, it has proven to be a non-event since the August 2011 FOMC announcement that first introduced the "2013 verbiage" effectively locking in the shorter duration Treasury issuances.  Somewhat ironic that the very next day this week, that same 2013 verbiage could have a big impact on bond markets, but this time, if it's changed or removed.

We're not making any bets here, but will say that the general level of uncertainty over what the FOMC will say and how they'll say it, combined with wondering how markets will receive the early forecast announcements is a fairly big culprit in current volatility/weakness.  Add in Treasury supply, other economic data, and European headlines, and there's more than enough to explain it away (if only "explaining away" meant it would "go away..."  but we'll have to wait at least until after Wednesday's FOMC events for that to even be possible).

Specific to mortgage/housing markets, Obama's State of the Union address is on Tuesday night, and there has been some speculation that new housing initiatives could be discussed.