Tuesday saw yet another uneventful day for bond markets, though a positive one.  MBS were a hot commodity and benefited greatly from light supply and the same steady to strong demand that has been standard fare of late.  Treasuries eked out gains as well, helped along by what limited news crossed the wires out of Europe.

The week finally, truly begins today as it marks the first notable appearance of three key ingredients: Economic data, Treasury Auctions, and the FOMC.  It's not that markets haven't had small nibbles of economic data, a shorter-term Treasury auction, and various Fed speeches earlier in the week, it's simply that today's versions of those things are significantly more interesting.

As we've recently been fond of pointing out, no one really cares about 2-3yr Treasury auctions any more.  On the rare occasion that markets move in response to one, chances are the movement borders on imperceptible, as it was with yesterday's 3yr's.  But today's 10's are a different animal.  There's more potential here for surprising result to push bond markets around enough for MBS to feel it.

But any major urges to trade in one direction or another after the auction could be muted due to the possibly even more important event that follows an hour later.  The FOMC releases minutes from the June 20th meeting.  Recall that the big question at the moment centers on the prospects for QE3.  The Fed has done a pretty good job of laying out the ifs/thens that would lead to QE3, so it's not clear what the minutes could say that would be a major surprise.  But there are two counterpoints to the general dismissiveness of the importance of this round of FOMC Minutes.

First is the fact that markets have been eerily quiet so far this week.  Of course, we know that not much has been going on, and so this could be completely coincidental, but the extent to which volume has been low and ranges contained almost suggests that there's some additional driving force behind the indecision in addition to the obvious.

Second is the sense that there's a consensus among analysts, strategists, economists, traders, and talking heads that this round of FOMC minutes is a non event.  We've pretty much been in that camp as well, but would note that the biggest market movements related to Minutes  have followed the minutes associated with FOMC meetings that DID NOT produce big market movements.  This, combined with the "too quiet" vibes have us wondering if we might not see a bit more reaction than everyone seems to be expecting today.