Large language models used for code editing can be trained and deployed in at least two output regimes: direct generation, where the model emits the entire modified file in one shot, and iterative diff-based generation ("steps"), where the model emits a sequence of localized search/replace edits applied one at a time until it signals completion or a step budget is exhausted. The diff-based regime is attractive because it mirrors how developers edit code and should require far fewer generated tokens per turn. We train two code models - a 100M-parameter model trained from scratch (Rainbow-Pony-1