Fiscal stimulus has been a hot topic for the bond market since the pandemic first kicked into a high enough gear to require fiscal support for the US economy.  It is the only reason 10yr yields didn't take a solid run at hitting 0%.  Such is the power of something that directly increases the supply of US Treasuries and simultaneously attempts to boost the economy.  The latest headlines suggest we could see a stimulus agreement as early as today--perhaps even before this afternoon's Fed announcement.  If stimulus passes and the Fed abstains from adjusting its bond buying portfolio, it could be a negative double whammy for rates (more so for Treasuries than mortgage rates).

But even before the Fed, bonds are taking the stimulus rumors quite seriously.  In fact, even before this morning's Retail Sales report, stimulus headlines were already setting the tone.  I mention Retail Sales because the bond watching community has a big problem when it comes to big movement that occurs any time remotely close to 8:30am on a day with big economic reports.  Analysts and journalists alike will often simply assume the 8:30am data had something to do with any big movement in the vicinity.  Hopefully that won't be the case today considering bonds weakened despite the econ data implying strength, and that the weakness occurred almost 15 minutes before the data even came out, but stranger conclusions have been drawn.

If anything, weaker Retail Sales had the logical impact of forcing bonds to second guess the pace of the AM sell-off.

From here, attention turns to the Fed at 2pm, while still keeping an eye out for any stimulus news in the meantime.  It would be fairly out-of-character for congress to agree on a bill and get it out the door by the early afternoon on a Wednesday, but if party leaders on both sides say it's a done deal, that's functionally equivalent as far as markets are concerned.