Although the 104-22 resistance level ended up keeping a lid on most of the day's price action, Fannie 3.0 MBS didn't venture much below 104-19 for the balance of the afternoon and are currently 4 ticks lower on the day at 104-20. Reprices have gone both ways, with the most recent being positive, and while we wouldn't necessarily lean on that as evidence that more could follow, it at least speaks to some sort of volatile equilibrium between bulls and bears heading into the close.

Stocks are spiking mildly off their lows following news that Boehner will forgo that long and lonesome road back to Ohio in order to meet with The President today. S&Ps are still off about 10 points from their 10:20am highs.

10yr Treasuries don't seem to care much and have managed to traipse sideways between their morning highs and afternoon lows, currently up 2.6 bps on the day at 1.7282.

Both MBS And Treasuries were peeking across the fence...

Both MBS and Treasuries are well off their weakest levels of the morning thanks to technical and tradeflow-based support that came in during and after the Fed's Twist buying operation from 10:15-11:00am. 10yr yields were technically in an uptrend through 11:00am but broke out of that trend channel right at 11am (though the highest yields were 20 minutes earlier). MBS simply held firm to their 104-16 support level mentioned earlier and have gradually followed Treasuries back into stronger territory.

To some extent the bond market bounce may have amounted to a capitulative risk-off trade following the big bounce lower in equities markets, but we'd hesitate to assume that's the case just yet. At the very least, the technical/tradeflow picture was supportive as well, with the big bounce lower occurring both sharply, with a noticeable increase in volume, and at the edge of an established technical zone around 1.75.

Since 11am, Boehner's comments on the Fiscal Cliff situation have helped equities continue to sell-off, though it looks like they're already trying to bounce. 10yr yields moved moderately lower with stocks and are subsequently moderately in tune with the bounce. 10's had a chance to break back below the mid 1.71's technical level and failed in a very clearly delineated fashion, not once, but twice. That's the line in the sand for broader bond markets at the moment and one that's not likely to be crossed without the help of a mostly awesome 30yr Bond Auction at 1pm.

As for MBS, negative reprice risk definitely ebbed with prices on Fannie 3.0s making it back up to 104-20 during all this volatility. But much like 10's, MBS have also encountered resistance at their own inflection point of 104-22. That'll serve as the MBS-specific line in the sand--to be tested on the chance we see a strong auction or are otherwise able to trade higher in the next hour. For now, it's overhead resistance.

MBS have been doing a decent job of holding onto sideways...

- Inventories +0.4 vs +0.4 consensus, +0.7 previous
- Sales -0.4 vs +1.2 previous

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for October, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,257.7 billion, down 0.4 percent (±0.2%) from September 2012 and up 3.1 percent (±0.4%) from October 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,619.2 billion, up 0.4 percent (±0.1%) from September 2012 and up 5.7 percent (±0.4%) from October 2011.

The total business inventories/sales ratio based on seasonally adjusted data at the end of October was 1.29. The October 2011 ratio was 1.26.

Even though it has led to slightly negative prices, there's been a refreshing amount of connectivity between market movements and economic events OTHER than Fiscal Cliff headlines. Yesterday it was the Fed and this morning it's the data.

While the later is nowhere near the former in terms of impact, it did serve to slightly reinforce/confirm the selling trend in bond markets starting around 6:30am this morning. Before that, Treasuries had a choppy overnight session with 10's first moving lower into the 1.6's and then rising to 1.72 into European hours. Throughout the course course of the European session, German Bunds helped pull Treasury yields back into the 1.6's, but 10's were only able to play that game for so long before getting back to their new favorite game: "selling pressure following significant events."

First it was NFP Friday that marked the bottom of the recent yield range, and then of course, FOMC yesterday provided an even bigger ratcheting movement upward in yield. Traders are going with that flow to a large extent this morning and the fact that Retail Sales had strong internals and Jobless Claims were the lowest in 2 months is not helping.

Bond markets briefly paused at moderately weaker levels following the data, but have since devolved, with 10's up to 1.7178 and Fannie 3.0 MBS down 4 ticks on the morning after opening unchanged. The only other economic report this morning is Business Inventories at 10am. Then the last of the week's Treasury Auctions arrives at 1pm with 30yr Bonds.

- PPI -0.8 vs -0.5 Consensus
- Core PPI +0.1 vs +0.2 Consensus
- Energy PPI -4.6, biggest drop since March 2009. Gas -10.1.
- No substantive impact from Sandy - Labor Dept.The Producer Price Index for finished goods fell 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods decreased 0.2 percent in October and rose 1.1 percent in September. At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 1.2 percent in November, and the crude goods index edged up 0.1 percent. On an unadjusted basis, the finished goods index advanced 1.5 percent for the 12 months ended November 2012, the smallest increase since a 0.5- percent rise for the 12 months ended July 2012.

- Headline Sales +0.3 vs +0.5 consensus, -0.3 previous
- Excluding Gasoline +0.8 vs -0.5 previous
- Commerce Dept says no impact from Sandy

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $412.4 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.7 percent (±0.7%) above November 2011. Total sales for the September through November 2012 period were up 4.3 percent (±0.5%) from the same period a year ago. The September to October 2012 percent change was unrevised from -0.3 percent (±0.2%).

Retail trade sales were up 0.2 percent (±0.5%)* from October 2012 and 3.4 percent (±0.8%) above last year. Nonstore retailers were up 11.1 percent (±2.8%) from November 2011 and sporting goods, hobby, book and music stores were up 7.1 percent (±4.8%) from last year.

- 343k vs 370k consensus, only minor revision to previous week from 370k to 372k

In the week ending December 8, the advance figure for seasonally adjusted initial claims was 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. The 4-week moving average was 381,500, a decrease of 27,000 from the previous week's revised average of 408,500.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 1, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 1 was 3,198,000, a decrease of 23,000 from the preceding week's revised level of 3,221,000. The 4-week moving average was 3,270,750, a decrease of 42,250 from the preceding week's revised average of 3,313,000.

Although the 104-22 resistance level ended up keeping a lid on most of the day's price action, Fannie 3.0 MBS didn't venture much below 104-19 for the balance of the afternoon and are currently 4 ticks lower on the day at 104-20. Reprices have gone both ways, with the most recent being positive, and while we wouldn't necessarily lean on that as evidence that more could follow, it at least speaks to some sort of volatile equilibrium between bulls and bears heading into the close.

Stocks are spiking mildly off their lows following news that Boehner will forgo that long and lonesome road back to Ohio in order to meet with The President today. S&Ps are still off about 10 points from their 10:20am highs.

10yr Treasuries don't seem to care much and have managed to traipse sideways between their morning highs and afternoon lows, currently up 2.6 bps on the day at 1.7282.

Both MBS And Treasuries were peeking across the fence...

Both MBS and Treasuries are well off their weakest levels of the morning thanks to technical and tradeflow-based support that came in during and after the Fed's Twist buying operation from 10:15-11:00am. 10yr yields were technically in an uptrend through 11:00am but broke out of that trend channel right at 11am (though the highest yields were 20 minutes earlier). MBS simply held firm to their 104-16 support level mentioned earlier and have gradually followed Treasuries back into stronger territory.

To some extent the bond market bounce may have amounted to a capitulative risk-off trade following the big bounce lower in equities markets, but we'd hesitate to assume that's the case just yet. At the very least, the technical/tradeflow picture was supportive as well, with the big bounce lower occurring both sharply, with a noticeable increase in volume, and at the edge of an established technical zone around 1.75.

Since 11am, Boehner's comments on the Fiscal Cliff situation have helped equities continue to sell-off, though it looks like they're already trying to bounce. 10yr yields moved moderately lower with stocks and are subsequently moderately in tune with the bounce. 10's had a chance to break back below the mid 1.71's technical level and failed in a very clearly delineated fashion, not once, but twice. That's the line in the sand for broader bond markets at the moment and one that's not likely to be crossed without the help of a mostly awesome 30yr Bond Auction at 1pm.

As for MBS, negative reprice risk definitely ebbed with prices on Fannie 3.0s making it back up to 104-20 during all this volatility. But much like 10's, MBS have also encountered resistance at their own inflection point of 104-22. That'll serve as the MBS-specific line in the sand--to be tested on the chance we see a strong auction or are otherwise able to trade higher in the next hour. For now, it's overhead resistance.

MBS have been doing a decent job of holding onto sideways...

- Inventories +0.4 vs +0.4 consensus, +0.7 previous
- Sales -0.4 vs +1.2 previous

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for October, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,257.7 billion, down 0.4 percent (±0.2%) from September 2012 and up 3.1 percent (±0.4%) from October 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,619.2 billion, up 0.4 percent (±0.1%) from September 2012 and up 5.7 percent (±0.4%) from October 2011.

The total business inventories/sales ratio based on seasonally adjusted data at the end of October was 1.29. The October 2011 ratio was 1.26.

Even though it has led to slightly negative prices, there's been a refreshing amount of connectivity between market movements and economic events OTHER than Fiscal Cliff headlines. Yesterday it was the Fed and this morning it's the data.

While the later is nowhere near the former in terms of impact, it did serve to slightly reinforce/confirm the selling trend in bond markets starting around 6:30am this morning. Before that, Treasuries had a choppy overnight session with 10's first moving lower into the 1.6's and then rising to 1.72 into European hours. Throughout the course course of the European session, German Bunds helped pull Treasury yields back into the 1.6's, but 10's were only able to play that game for so long before getting back to their new favorite game: "selling pressure following significant events."

First it was NFP Friday that marked the bottom of the recent yield range, and then of course, FOMC yesterday provided an even bigger ratcheting movement upward in yield. Traders are going with that flow to a large extent this morning and the fact that Retail Sales had strong internals and Jobless Claims were the lowest in 2 months is not helping.

Bond markets briefly paused at moderately weaker levels following the data, but have since devolved, with 10's up to 1.7178 and Fannie 3.0 MBS down 4 ticks on the morning after opening unchanged. The only other economic report this morning is Business Inventories at 10am. Then the last of the week's Treasury Auctions arrives at 1pm with 30yr Bonds.

- PPI -0.8 vs -0.5 Consensus
- Core PPI +0.1 vs +0.2 Consensus
- Energy PPI -4.6, biggest drop since March 2009. Gas -10.1.
- No substantive impact from Sandy - Labor Dept.The Producer Price Index for finished goods fell 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods decreased 0.2 percent in October and rose 1.1 percent in September. At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 1.2 percent in November, and the crude goods index edged up 0.1 percent. On an unadjusted basis, the finished goods index advanced 1.5 percent for the 12 months ended November 2012, the smallest increase since a 0.5- percent rise for the 12 months ended July 2012.

- Headline Sales +0.3 vs +0.5 consensus, -0.3 previous
- Excluding Gasoline +0.8 vs -0.5 previous
- Commerce Dept says no impact from Sandy

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $412.4 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.7 percent (±0.7%) above November 2011. Total sales for the September through November 2012 period were up 4.3 percent (±0.5%) from the same period a year ago. The September to October 2012 percent change was unrevised from -0.3 percent (±0.2%).

Retail trade sales were up 0.2 percent (±0.5%)* from October 2012 and 3.4 percent (±0.8%) above last year. Nonstore retailers were up 11.1 percent (±2.8%) from November 2011 and sporting goods, hobby, book and music stores were up 7.1 percent (±4.8%) from last year.

- 343k vs 370k consensus, only minor revision to previous week from 370k to 372k

In the week ending December 8, the advance figure for seasonally adjusted initial claims was 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. The 4-week moving average was 381,500, a decrease of 27,000 from the previous week's revised average of 408,500.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 1, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 1 was 3,198,000, a decrease of 23,000 from the preceding week's revised level of 3,221,000. The 4-week moving average was 3,270,750, a decrease of 42,250 from the preceding week's revised average of 3,313,000.

- Inventories +0.4 vs +0.4 consensus, +0.7 previous
- Sales -0.4 vs +1.2 previous

The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for October, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,257.7 billion, down 0.4 percent (±0.2%) from September 2012 and up 3.1 percent (±0.4%) from October 2011.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,619.2 billion, up 0.4 percent (±0.1%) from September 2012 and up 5.7 percent (±0.4%) from October 2011.

The total business inventories/sales ratio based on seasonally adjusted data at the end of October was 1.29. The October 2011 ratio was 1.26.

- PPI -0.8 vs -0.5 Consensus
- Core PPI +0.1 vs +0.2 Consensus
- Energy PPI -4.6, biggest drop since March 2009. Gas -10.1.
- No substantive impact from Sandy - Labor Dept.The Producer Price Index for finished goods fell 0.8 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods decreased 0.2 percent in October and rose 1.1 percent in September. At the earlier stages of processing, prices received by manufacturers of intermediate goods declined 1.2 percent in November, and the crude goods index edged up 0.1 percent. On an unadjusted basis, the finished goods index advanced 1.5 percent for the 12 months ended November 2012, the smallest increase since a 0.5- percent rise for the 12 months ended July 2012.

- Headline Sales +0.3 vs +0.5 consensus, -0.3 previous
- Excluding Gasoline +0.8 vs -0.5 previous
- Commerce Dept says no impact from Sandy

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $412.4 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.7 percent (±0.7%) above November 2011. Total sales for the September through November 2012 period were up 4.3 percent (±0.5%) from the same period a year ago. The September to October 2012 percent change was unrevised from -0.3 percent (±0.2%).

Retail trade sales were up 0.2 percent (±0.5%)* from October 2012 and 3.4 percent (±0.8%) above last year. Nonstore retailers were up 11.1 percent (±2.8%) from November 2011 and sporting goods, hobby, book and music stores were up 7.1 percent (±4.8%) from last year.

- 343k vs 370k consensus, only minor revision to previous week from 370k to 372k

In the week ending December 8, the advance figure for seasonally adjusted initial claims was 343,000, a decrease of 29,000 from the previous week's revised figure of 372,000. The 4-week moving average was 381,500, a decrease of 27,000 from the previous week's revised average of 408,500.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 1, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 1 was 3,198,000, a decrease of 23,000 from the preceding week's revised level of 3,221,000. The 4-week moving average was 3,270,750, a decrease of 42,250 from the preceding week's revised average of 3,313,000.