Yesterday Russia increased interest rates 6.5%, this morning it did not help - the ruble is in a free fall. The battered ruble fell to a new record low against the dollar, just hours after the Russian central bank's surprise move overnight to increase interest rates to 17%. Shockwaves from collapsing oil prices hit stocks and currencies closely linked to commodity prices. Emerging-markets selloff rattled Asia for a second day, sending stocks tumbling and forcing central banks in the region to intervene to slow declines in their currencies. Russia tried to stabilize its currency - it failed. UK interest rates continue to decline as deflationary pressures build as oil and commodities around the world fall.

U.K. government bonds have been supported as the global inflation outlook crumbles amid plunging commodity prices, leading traders to pare back wagers on higher borrowing costs.

The German 10yr bonds rose for a seventh day (price), the longest run of gains since October 2013. The bonds advanced as Brent crude dropped below $60 a barrel for the first time since July 2009, weighing on emerging markets and fueling speculation the European Central Bank will begin sovereign-debt purchases. Germany's 10-year yield fell five basis points, or 0.05 percentage point, to 0.57%.

Deflation spreading like a flu epidemic, led by oil prices all commodities are falling rapidly over the last few weeks. The deflationary concerns even working into US markets. Today the FOMC begins it meeting debating when to begin increasing interest rates - at least that is the general consensus among analysts. We doubt the Fed is in any position to increase rates, or even hint that rates will be increased soon. Global economies are slowing quickly - the US so far is seen as some kind of island that will not be effected by what is occurring around the world. That idea has driven equity markets higher through the year; maybe it is sinking in that the US is not the island investors believed. The key indexes have been under selling pressure now for almost two weeks.

Domestically, this morning we saw November housing starts decline versus an estimate that it was going to increase.. On a year-to-year basis, total housing starts were down 7.5% in November from the same month in 2013. This only solidifies the evidence that first time buyers are not buying, and prefer to rent. The optimists look at this data saying, starts are over a million for the last three months and see the glass half full. Interest rates at historic lows but the young consumer is not interested. Extreme credit standards brought on by Dodd/Frank legislation is ne impediment but it is not the only factor; there is no incentive to buy. Property values except in a few markets are not increasing, no inflation; and the need for a new IPhone keep many from saving enough for a down payment.

At 10:00AM, we have Mortgage Backed Securities (MBS) hovering between support and resistance levels as they are up 22BPS, and the 10yr at 2.08% after opening at 2.04%. The DJIA is up 78 points.

The FOMC meeting begins today, ending tomorrow at 1:00 with the policy statement, then Yellen will hold her press conference. The issues for the FOMC; the debate over changing the phrase 'considerable period' on how long the Fed will refrain from increasing rates, the Fed's view of the labor market (it isn't as strong as the headlines, the decline in crude and all commodity prices as it relates to inflation, and what the FOMC thinks of the declining global economies.

Expect some volatility today. Crude oil and Russian collapse of the ruble are the focus for the day, (just on the wires Russian leaders are calling for an emergency meeting right now). The FOMC meeting is likely to be a stabilizing factor as the day progresses. The technical outlook for the interest rate markets remains solidly bullish, investors moving into more of a safe mode with all the global economic concerns. Foreign investors are snapping up Treasury bonds at the fastest clip in two years, propelling yields to fresh lows even as the U.S. economy gains a little steam; safest and highest rates in G-7 countries.