Today's Retail Sales data stood a better chance to move markets than last time.  Not only did the data move markets today, but it did so in a surprisingly big way given the magnitude of the 'miss.'  Headline Retail Sales managed to hit +0.9 vs a +1.0 forecast.  Not too bad right? 

Superficially, that's not a bad miss at all, but apparently bonds were prepared for a big beat--or at least simply waiting to rule one out.  Incidentally, it wouldn't be hard to imagine that traders were psychologically prepared for a stronger report considering we're coming off the weakest streak since the beginning of the financial crisis as far as this data is concerned.  So perhaps the fact that it was "only" roughly in line with expectations was a lot less threatening for bond markets than it might have been. 

At the same time, Producer Prices came out showing the same lack of inflation that we already know about.  They too were very close to forecast levels, but very clearly not any better. 

With that, bonds were off to the races and 10yr yields dropped a quick 6 bps.  Fannie 3.0 MBS gained three eighths of a point before leveling off and  trading sideways for the rest of the morning. 

After European markets closed, bonds gave back some of the gains amid late day illiquidity, but retained a decent enough chunk to keep today's rate sheets very near the best levels since early February.