Continued flattener as we wait for the Fed

The 2-10 slope flattened 2bps today, and has now flattened the last 4 days except Thursday when the curve was unchanged. The 10-year rallied almost 1/4 point, which should encourage the bond bulls after Friday's rout. I'm hearing that many foreign buyers came in on weakness, which has been a recurring theme for most of the last year or so. I'm sure volume was light with the Fed coming out tomorrow.

The rally gives a bear room to work tomorrow. Had we sold off today, I would have bet on a rally tomorrow just based on technicals. However with the 1/4 point rally on no news, I'm suspicious that today's rally is exaggerated by light volume, and I'm inclined to sell it.

The traders I've talked to are chattering about the Fed scenarios for tomorrow, but when you get down to it, most people expect little change in their language. If that happens, then I doubt the market moves much. If anything, it will disappoint some of the "Cut Now!" crowd and touch off a bear flattener.

But like I said, it sounds like most traders expect no change in statement. I agree with that, so if that's what happens, don't expect much market movement.