Thursday's session is a bit tricky.  Any value over time can be charted, and the general tone/sentiment/optimism of the Fiscal Cliff debate is no exception.  Before you get your hopes up, I should tell you that I haven't charted this, but if I had, it would have been at it's highest recent levels heading into Wednesday morning.  It would have been volatile and low last week with constant political bickering/posturing and even a certain measure of "tuning out" on the part of markets.  As we discussed then, Fiscal Cliff headlines would have to be more meaningful in order to catch markets' attention. 

That happened in spades between Friday and Tuesday with the volleying of deals and details between the two parties in what LOOKED LIKE more and more of a conciliatory fashion.  If that was all just an act, it was convincing enough for bond markets to hit their weakest levels since late October.  

But the line on our imaginary chart would have dropped off steeply today as both Obama and Boehner were back to the same old routines of slamming the other side's lack of ability to compromise.  Obama said he'd veto the GOP tax bill if it made it to his desk and, in the shortest podium visit of the year, Boehner said that if the President didn't compel the senate to approve the bill that he'd be responsible for the largest tax increase in American history!  High Drama!  Especially considering Boehner's 30 second speech came after the President already promised to veto.  

In a few short hours, all the week of ostensible compromise and progress was undone--that is, if you take their words for it!  More likely, each side knows roughly what they'd agree to and knows that it wouldn't take them long to figure things out if it weren't for audience that is the American Public.  Markets are aware of this and largely view politicians as classless dirtbags that value their vacation time over the benefit of the people.  The cat's out of the bag... They don't want to have to come back from Christmas break early and the smart money seems to be guessing (or at least "hedging against the fact") that they'll get something done by Friday.

As such, bond market yields weren't too eager to chase the ostensible shift in Fiscal Cliff sentiment back down into the sewer.  Here's an update of Wednesday morning's chart:

Off the scariest levels, but still clearly unwilling to break back into Monday's territory...

It's tempting to hope that the apparent stalemate in Washington will leave more logical market movers in control, such as the massive line up of economic data.  However, that could be a trap...  Not only do none of these reports scream "look at me!" but it continues to be the case that markets are absolutely on edge, anxiously waiting for that first REAL piece of news regarding the Fiscal Cliff.  Thursday is cutting it pretty close to the point of no return that impedes on next week's holiday vacation time.