Rates Running Out of Things to be Afraid Of?

Bonds improved today--mostly during the overnight trading session, but they did a good job defending those gains during domestic hours.  Friendly Fed comments and weaker economic data were only modestly helpful.  On the other side of the battle, heavy corporate bond issuance, negative technical momentum and yesterday's vaccine news should at least be keeping the bears in the fight.  If those factors aren't enough to keep the threat of 1.0%+ 10yr yields on the table this week, it's hard to imagine what would be.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Retail Sales 0.3 vs 0.5 f'cast, 1.6 prev (revised down from 1.9)

  • Core Retail Sales 0.1 vs 0.5 f'cast

  • Last month's Retail Sales revised lower by 0.3 (and "core" by 0.5) 

  • Industrial Production 1.1 vs 1.0 f'cast, -0.4 prev

  • Builder Confidence 90 vs 85 f'cast, 85 prev

Market Movement Recap
08:46 AM

Bonds rallied during European market hours with 10yr yields roughly 3bps lower at .885 to start the domestic session.  Weaker Retail Sales data helped bonds gain a bit more ground and caused overnight stock weakness to extend a bit.  UMBS 1.5 and 2.0 coupons are both an eighth a point lower with a small fraction of those gains arriving after the data.

12:57 PM

Much like yesterday, bonds are sticking to narrow ranges without much fuss.  Apart from the morning's Retail Sales reaction, econ data hasn't played a big role.  Notably, bonds are holding gains despite a recovery in stocks.  10yr yields are down 3.3bps at .878 and MBS are up just over an eighth of a point.

03:40 PM

Both Treasuries and MBS are near their best levels of the day as trading winds down.  The gains come in spite of heavy corporate bond issuance and a mid-day bounce in stocks.  We can point toward technicals, economic data, and downbeat comments from Fed speakers (comments that spoke to the possibility of additional accommodation in December).