Our benchmark FNMA 4.5% bond traded indecisively within a 37bp range before ending 13bp lower at $100.72. Traders largely marked time ahead of tomorrow's big FOMC rate decision and policy statement. It is widely expected the Fed will cut the Fed Funds rate in half to 50bp from their current 1.0% level and they will also probably lower the Fed's Discount Window rate by at least the same amount. The day's economic news was woeful as usual - what else is new? The NY Empire State Index painted a dismal picture for manufacturing activity in the New York Region during December. There was a contraction in activity with a reading of -25.8. While this is worse than November's -25.4 reading, it was slightly better than the consensus forecast of -27.0. Industrial Production was a little worse than anticipated, falling -0.6% in November with factory production declining 1.4%. Capacity Utilization fell to a five-year low of 75.4% from a revised 76%. The Treasury International Capital (TIC) report for Oct. showed net foreign buying of U.S. investments shriveled from $65.4 billion to just $1.5 billion. Foreign investors shied away from stocks, corporate bonds, and agency bonds but increased their 'flight to safety' buying in Treasuries to $34.6 billion from $20.7 billion in September. Meanwhile the stock market had to contend with the continuing fallout from the $50 billion fraudulent investment scheme devised by Bernard Madoff. The Dow fell 65 points to close at 8,564 while the broader S&P 500 Index dropped 11 points to end at 868. The NASDAQ Composite Index lost 32 points to finish at 1,508.