GSingh,
Yes, those IMD3 products appear to be from the generator, at typical values. Typically you will see -50 dBc below -10 dBm, but it will get worse as you increase amplitude.
If you need two-tone better than -50 dBc, you would probably want 2 generators and a directional combiner. There are digital techniques as well, but they will be less stable over temperature and frequency.