MBS RECAP: Best Close in Nearly 6 Months for Bonds

One year ago today, things "got real" for bond markets as they leaped into significantly stronger territory, ultimately ending the day at the best closing levels in more than a year before going on to have an even crazier October 15th (that was the day with the intraday swing from 2.23 to 1.86 that teams of experts are still trying to figure out).

Today wasn't quite on par with last year's October 14th (which also benefited from the shock value of being the Tuesday after a 3-day weekend), but it was no slouch.  10yr yields and MBS closed at their best levels in nearly 6 months as global growth concerns hit home.

The attack came on several fronts.  The obvious issues--and the biggest sources of volume--were the morning economic reports.  Retail Sales missed estimates and only got worse by the time one looked at the internals and revisions.  Producer Price data was a real eyesore for any hike-happy Fed members.  Core PPI fell to +0.8 year-over-year vs a +1.2 forecast.   Month-over-month core PPI fell to a record low -0.3%.  That means that even after we factor out the costs of food and energy, prices still fell at the producer level (things look even worse if you include fuel, of course).

Then there were earnings reports from big banks and Walmart, with the latter doing the most to dogpile on the rally that was already in progress for bond markets.  Volume returned in a big way as trading levels broke through key resistance levels.