There was a better chance that bond markets would react to today's Retail Sales data despite the lack of reaction to the last reading (reasons discussed here).  Not only did we get a reaction today, but it was so big that it didn't even make sense. 

It's not that Retail Sales data isn't capable of moving 10yr yields 6bps or MBS by three eighths of a point.  It's just that we wouldn't expect to see that kind of reaction when the headline is only 0.1 away from the forecast (+0.9 actual vs +1.0 forecast, in today's case).  Even though some of the internal components were a bit weaker, they weren't nearly weak enough to account for the ensuring bond market gains.

Here is the list of additional players discussed in morning update on MBS Live:

  • The first and best consideration is that traders were waiting to buy, but couldn't safely do so until stronger data could be ruled out.  If Retail Sales had crushed expectations, bonds would  probably be going the other way--at least at first.  It's easier for traders to jump ON trains after they start moving that to jump OFF trains they'd boarded too early.
  • PPI was also out at 8:30 and was in line with expectations (-0.8 vs -0.8 year-over-year)
  • European bond markets hit more new all-time lows overnight.
  • From a technical standpoint, domestic bond markets had been locked in a boring orbit around safe, central levels.  It was only a matter of time before they picked a direction, and it makes good enough sense that they'd be planning on making that decision after the week's biggest piece of data.  The fact that 10yr yields bottomed out at 1.86 is further evidence that technical considerations are a part of today's move (1.84-1.86 is an important technical zone).


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
102-19 : +0-10
FNMA 3.5
105-08 : +0-07
FNMA 4.0
106-30 : +0-02
Treasuries
2 YR
0.5040 : -0.0320
10 YR
1.8720 : -0.0580
30 YR
2.5100 : -0.0650
Pricing as of 4/14/15 12:52PMEST

Morning Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
9:41AM  :  Mysteriously Big Reaction to Small Miss in Retail Sales Data

Live Chat Featured Comments
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Sung Kim  :  "might agree with you there hugh"
Andrew Benson  :  "Sung: I don't trust it either, but I do like it."
Hugh W. Page  :  "Might be a good day to lock....."
Sung Kim  :  "i almost don't trust this move"
Hugh W. Page  :  "Maybe Wells Fargo profit decline is the culprit . . ."
Matthew Graham  :  "that's part of it. We'd been hugging that middle territory at 1.93"
Sung Kim  :  "technical?"
Matthew Graham  :  "yeah. I'm writing about it presently. No major revelations, but a few possibilities "
Sung Kim  :  "moves seems very outsized today MG?"
Sung Kim  :  "not much of a miss, but very outsized rally, wonder what people were expecting"
Matthew Graham  :  "it's definitely more than the headlines warrant, SK. Maybe buyers were waiting to rule out a beat"
Sung Kim  :  "holy rally, why? because we didn't beat?"
Matthew Graham  :  "RTRS- US MARCH RETAIL SALES EX-AUTOS +0.4 PCT (CONS +0.6 PCT) VS FEB UNCHANGED (PREV -0.1 PCT)"
Matthew Graham  :  "RTRS- US MARCH RETAIL SALES +0.9 PCT (CONSENSUS +1.0 PCT) VS FEB -0.5 PCT (PREV -0.6 PCT)"