Looking For Silver Linings Despite Falling Sky

After a huge day of snowball selling yesterday, bonds started out in weaker territory today.  Hugely strong Retail Sales data and sharply higher inflation told rates to keep on rising, but they quickly refused.  Several hours later, a decidedly weak 20yr bond auction made the same suggestion (i.e. higher rates), but yields continued holding modest gains.  As far as days with intraday yields hitting their highest levels in almost a year are concerned, that's about as much resilience as we could hope for.  Tomorrow will be critical in confirming or rejecting today's defiant show of support.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Retail Sales 5.3 vs 1.1 f'cast, -1.0 prev

  • Producer Prices (Inflation, y/y) 2.0 vs 1.1 f'cast, 1.2 prev

Market Movement Recap
08:21 AM

Bonds tried to bounce overnight but hit technical resistance at 1.28%.  Weaker ever since with the sharpest losses at the start of the domestic session.  1.315% on the 10yr heading into Retail Sales data.  MBS are down an eighth.

08:43 AM

More weakness following balmy econ data.  10yr quickly hit highs of 1.33% before recovering back down to pre-data levels.  UMBS 2.0 coupons are still down an eighth.

01:12 PM

Much-needed technical bounce coincided with stock losses earlier.  Yields were as low as 1.27% but are up and over 1.29% now following a weak 20yr Bond Auction.  Selling seems relatively contained so far an both MBS and Treasuries are holding on to modest gains at the moment.  

02:35 PM

No reaction to Fed Minutes.  Treasuries still slightly green but off their best levels and MBS still slightly red, underperforming.