Volatility spiked with the implied stock volatility index (VIX) closing above 20 as oil closed above $102 a barrel.

Stocks closed relatively flat with corporate credit spreads unchanged to tighter, particularly in cash bonds where demand remains relatively strong for high-rated paper.

Treasury bonds sold off on Bernanke's beige book comments about the conditions in the labor market; players will be watching Friday's payroll numbers closely.

In new issues, Medical HMO Cigna sold $600 million in a two-part offering; the bonds appeared to trade relatively weak in the secondary markets.

State Street sold $2 billion in debt in a three-part offering: $250 million of 3 year FRNs (floating rate notes), $1 billion of 5 year notes, and $750 million of 10 year notes.

With expectations of inflation becoming more widespread, investor demand for FRNs gets progressively stronger.

Initial jobless claims numbers are out tomorrow.