Decent Rally Despite Strong Retail Sales and Hawkish Fed Speakers

It was an interesting day for the bond market in terms of apparent inputs for rate movement and the actual movement seen in rates.  Economic data is one of the classic inputs and Retail Sales--while not a starting player--is at least on the varsity squad of market moving reports.  Despite the stronger result, bonds only sold off for a few minutes before finding their footing and moving to the day's best levels.  That rally momentum continued even as the Fed trotted out several hawkish speakers who reminded markets that more rate hikes were yet to come.  Today's video discusses why we are likely to hear much more hawk talk from the Fed (and why bonds may be willing to ignore it as much as they did today).

Econ Data / Events
    • Retail Sales
      • 1.3 vs 1.0 f'cast, 0.0 prev
    • Core Retail Sales 
      • 0.7 vs 0.3 f'cast, 0.6 prev
    • Import Prices
      • -0.2 vs -0.4, -1.1 prev
    • Industrial Production
      • -0.1 vs +0.2 f'cast, 0.1 prev
      • last month revised down from 0.4
Market Movement Recap
08:39 AM

Slightly stronger to open, then losing a bit of ground after retail sales data.  10yr up less than 1bp at 3.786 and MBS down only 2 ticks (.06).

08:59 AM

Losses reversing course.  No obvious motivations unless we want to get speculative.  10yr down 3bps at 3.747.  MBS up more than an eighth.

01:03 PM

Additional gains after the strong 20yr bond auction.  10yr yield down 7bps at 3.708.  MBSA up 3/8ths of a point, and possibly more by the time liquidity improves.

03:09 PM

Best levels of the day now despite hawkish comments from Fed's Waller.  MBS up nearly half a point and 10yr yields down 9bps at 3.686.