Coming off two positive days in a row to begin the week in bond markets, things get a bit more serious today.  Whereas Monday and Tuesday could have just as easily traded to current levels with the help of a technical reaction to Friday's rout and "month-end" buying, today's final resting place is most likely to be determined by events on the calendar, namely the FOMC Announcement at 2:15pm.

But this week's FOMC is somewhat overshadowed (how often do we get to say or think that?!) by the ECB Announcement tomorrow (and perhaps to a lesser extent by NFP Friday).  Markets are most curious what sort of bullets are actually loaded in the fiscal firearm of ECB Pres Mario Draghi and even more curious to see which of them (if any) get fired on Thursday.  The proximity of last week's statements (well, they were "threats" more than anything) to this week's ECB Announcement is incredibly interesting, and we can't help but think that there's no way that the unconventional policy tools discussed late last week get absolutely no show time in the official communication.

More than anything the FOMC is likely to say, that ECB news is really what we're waiting for.  There are several reasons for this, not the least of which being that it would mark a significant change in the perception that Europe can't seem to come together to "fix stuff."  And although no one would view some unconventional ECB policy as "fixing stuff," you'd be well within your right to view it as an indication that there's at least hope for that (for the record, there doesn't seem to be any hope currently, though we have our feelers out).  We'll talk more about "why would that make anyone hopeful?" tomorrow.

For today, the central bank in focus is our own and markets seem to be leaning toward the September meeting as the more likely time that the Fed will uncork some additional easing.  But that doesn't mean they don't have a bottle or two on the shelf for your consideration.  Try this vintage 2012 for example...  It starts out quite similar to most other "relatively unchanged" FOMC statements, but has a clearly distinguishable differences in the ZIRP verbiage.  What you might be familiar with as "late 2014" could easily be replaced with "late 2015."

That's just one possibility, and not necessarily a likely one.  We would, however, agree that today's statement is less likely to contain a major tape-bomb owing to "new" stimulus, but rather to simply serve in some way to "ramp up" the gravity of existing policy.  Incrementally more austere...  More serious...  "I will QE this economy right around if you don't shape up, mister!"  However you want to look at it...  The more that this sort of clearly defined commitment to buy bonds shines through, the more impact today's statement is likely to have. 

And if it's a downer for bond markets, we'd just have to hope that the ECB statement is an "upper."  Even so, there's not much the Fed could do, apart from leaving the statement "too unchanged" (i.e. markets are expecting some measure of "love") or for some reason, actually pulling back from the idea of QE3 (note: this won't happen today), to cause too much of a downer with markets still waiting to see if Draghi merely puts on a gun show and ammunition symposium on Thursday, or if he actually wows onlookers with a shooting demonstration.