MBS RECAP: Bond Markets' Big Reaction to Little Miss in Data

By: Matthew Graham

Today's Retail Sales data stood a better chance to move markets than last time.  Not only did the data move markets today, but it did so in a surprisingly big way given the magnitude of the 'miss.'  Headline Retail Sales managed to hit +0.9 vs a +1.0 forecast.  Not too bad right? 

Superficially, that's not a bad miss at all, but apparently bonds were prepared for a big beat--or at least simply waiting to rule one out.  Incidentally, it wouldn't be hard to imagine that traders were psychologically prepared for a stronger report considering we're coming off the weakest streak since the beginning of the financial crisis as far as this data is concerned.  So perhaps the fact that it was "only" roughly in line with expectations was a lot less threatening for bond markets than it might have been. 

At the same time, Producer Prices came out showing the same lack of inflation that we already know about.  They too were very close to forecast levels, but very clearly not any better. 

With that, bonds were off to the races and 10yr yields dropped a quick 6 bps.  Fannie 3.0 MBS gained three eighths of a point before leveling off and  trading sideways for the rest of the morning. 

After European markets closed, bonds gave back some of the gains amid late day illiquidity, but retained a decent enough chunk to keep today's rate sheets very near the best levels since early February.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
102-16 : +0-07
FNMA 3.5
105-06 : +0-04
FNMA 4.0
106-29 : +0-01
Treasuries
2 YR
0.5160 : -0.0200
10 YR
1.8980 : -0.0320
30 YR
2.5440 : -0.0310
Pricing as of 4/14/15 4:28PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:31PM  :  ALERT ISSUED: Negative Reprice Risk Now a Reality
2:05PM  :  ALERT ISSUED: Early Heads Up on Potential Reprice Risk
9:41AM  :  Mysteriously Big Reaction to Small Miss in Retail Sales Data

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Hugh W. Page  :  "Thank you AGAIN MBS LIVE"
Hugh W. Page  :  "Glad I just locked two :)"
Victor Burek  :  "if the seller is behind on payments, that would be an issue"
John McClellan  :  "question...Have a borrower trying to buy a house from a relative...as an investment...can you do this? non - arms lenght"