Of all the reports silenced by the government shutdown, Retail Sales was probably the most missed.  It didn't help that December is a rather important month for such data.  December's report finally arrived today, and it made waves.

While there has been some question as to how quickly markets would be willing to "trust" the economic data affected by the shutdown, traders were instantly willing to react in this case for 2 reasons.  First off, the Census Bureau simply told markets that its collection efforts were solid right on the front page of the report.  But even more important, in this case, was the size of the miss, with sales falling at their fastest pace since 2009.  It was also a rare "down December" for the series, with 2014 being the only other example during this expansion cycle.

Even though there was almost certainly an impact on sales from the government shutdown (whether from government employees holding back on spending due to a lack of a paycheck or other consumers holding back due to shutdown-related uncertainty), traders weren't interested in trying to guess how big that impact should be.  These numbers are here today, and they were bad enough to be worth trading.  

10yr yields dropped 3bps in fairly short order after improving by nearly 3bps in the overnight session.  Fannie 3.5 and 4.0 MBS gained 7 ticks (.22) and 4 ticks (.125) respectively.  Those levels held up without much fuss for the rest of the day.  In the bigger picture, bonds rallied as much as possible without doing anything to threaten the existing consolidation range.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
100-06 : +0-07
10 YR
2.6550 : -0.0510
Pricing as of 2/14/19 5:17PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
8:46AM  :  Bonds Rally Following Weak Retail Sales Reading

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "this epilogue nonsense is a non-issue for markets, just political theater and a "root cause" listed on my hypertension survey"
Matthew Graham  :  "In any event, the one thing I'd urge you to notice above all else is the fact that traders can ask themselves these same questions and that there was effectively no reaction to these newswires. By the time we, here in MBS Live, can hypothesize on those sorts of ifs/thens, smart traders will have already moved the money. Therefore, the question is often already answered by the market just as quickly as you can think about it."
Matthew Graham  :  "Their answer this time: ZZZZzzzz...."

Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, Feb 14
8:30 Producer Prices (%) Jan -0.1 0.1 -0.2
8:30 Core Producer Prices YY (%)* Jan +2.6 2.5 2.7
8:30 Retail Sales (ex-autos) (%) Dec -1.8 0.1 0.2
8:30 Retail Sales (%)* Dec -1.2 0.2 0.2
8:30 Continued jobless claims (ml) w/e 1.773 1.740 1.736
8:30 Jobless Claims (k) w/e 239 225 234
Friday, Feb 15
8:30 Export prices mm (%)* Jan -0.1 -0.6
8:30 Import prices mm (%)* Jan -0.1 -1.0
8:30 NY Fed Manufacturing Feb 7.00 3.90
9:15 Capacity Utilization (%) Jan 78.7 78.7
9:15 Industrial Production (%) Jan 0.1 0.3
10:00 5yr Inflation Outlook (%)* Feb 2.6
10:00 Consumer Sentiment Feb 93.0 91.2
10:00 1yr Inflation Outlook (%)* Feb 2.7