Mixed Reaction to Data. Range Remains Intact

European bonds set the tone in the overnight session after a normally hawkish ECB member made dovish comments on the near term rate hike/pause outlook.  German Bunds rallied a full 10bps peak to trough while US 10s barely managed 5bps over the same time frame.  The AM econ data in the US created some 2-way volatility as the Retail Sales headline was at odds with internals, but bonds were already having second thoughts as evidenced by a clear run-in with resistance at 3.75% overnight. Yields were sideways and choppy until Europe closed for the day.  After that, there was a modest drift toward--but not into--weaker territory.  All in all an uneventful day that is perfectly in line with the broader sideways baseline expected between last week's rally and next week's Fed announcement. 

Econ Data / Events
    • Retail Sales
      • 0.2 vs 0.5 f'cast, 0.3 prev
    • NAHB Builder Confidence
      • 56 vs 56 f'cast, 55 prev
    • Industrial Production
      • -0.5 vs 0.0 f'cast, -0.5 prev
Market Movement Recap
08:30 AM

Nice gains overnight with Europe.  10yr down 6.7bps at 3.742 and holding after data.  MBS up 6 ticks (.19)

10:38 AM

Quick selling as traders reconsidered data, but recovering now.  MBS at highs, up over a quarter point.  10yr down 5bps at 3.758.

12:41 PM

Weakest levels of the day at EU closes.  10yr still down 3.2bps at 3.777.  MBDS up only 2 ticks (0.06).

04:31 PM

Leveling off a bit now after hitting weaker levels just after 3pm.  10yr yields down 2.8bps at 3.781.  MBS currently unchanged after being down 2-3 ticks (0.06-0.06)