"The auction is going to be next Wednesday," Simons said. "The indexed rate is tied to the three-month bill auction. It just gives them another security to market to a group of investors interested in the short end."
The auction should go well, he added.
"They are going to allow themselves to lock in greater amounts of financing at lower levels than would be otherwise available," Simons said. "It has a daily reset as a floater, but the rate it's referencing is only going to change every week."
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While important, that wasn't the big talk of the day in the bond market.
The real buzz was about Pimco CEO Mohamed El-Erian who announced Tuesday that he was leaving the company. More than one bond market participant said it was quite symbolic that one of the biggest names in the bond market is leaving at such an important inflection point for bonds.
The Fed began to slow its quantitative easing program this month and is expected to continue. Turbulence in the bond market began last year with talk of the Fed pullback, and the market's concern is that the Fed's exit may not go smoothly.
"If [El-Erian] is going, it makes you wonder if you've been in this business for a long time whether this is the time to get out," said one Wall Streeter, half jokingly.
Bond market participants had theories of their own, but many thought El-Erian was taking the blame for outflows and the performance of Pimco funds. Investors withdrew a net $41.1 billion from its Total Return fund last year, and its U.S. listed mutual funds saw $30.4 billion in withdrawals.
The Financial Times on Wednesday quoted sources saying that El-Erian was leaving because of long hours and friction with Pimco founder Bill Gross, who runs intense, early-morning meetings and is said to make member strenuously defend their viewpoints.
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What else to watch
Companies reporting before Thursday's open include McDonald's, Union Pacific, Baxter, Lockheed Martin, United Continental, Southwest Ari, KeyCorp, Cypress Semi and Johnson Controls. Companies reporting after the close include Microsoft, Starbucks, Discover Financial, Juniper Networks, Federated Investors, E-Trade, Applied Micro, International Game Tech, Altera, Celanese and Intuitive Surgical. Samsung also reports.
"The big news items right now are earnings," said Steve Massocca at Wedbush Securities. "They're barely clearing the recently lowered bar."
Stocks meandered Wednesday in a mixed market. The Dow was down 41 at 16,373, dragged down by IBM, which reported disappointing earnings news Tuesday afternoon. The S&P 500 was up 1 at 1,844, and Nasdaq was up 17 at 4,243.
The small cap Russell 2000 jumped ahead, gaining 1.1 percent to 1,181. It and the Nasdaq are now outpacing the S&P 500 and Dow with 1.5 percent gains since Jan. 1.
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Treasury prices fell Wednesday, and yields rose slightly. The 10-year was yielding 2.85 percent. There was some focus on Europe, where German bund prices declined as investors jumped into a 10-year Spanish debt issue, showing continued strong demand for riskier peripheral debt.
—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.