In the week just past, markets were slavishly tuned-in to headlines and developments surrounding US/China trade relations.  This generally resulted in bond gains and stock losses.  The week, as a whole, represented an unexpected break from the trend of containment seen in the previous week (noted in chart below).

Now, the current week begins with the same sort of breakout.  

2019-5-13open

But why are these breakouts 'unexpected?'  To be fair, they weren't!  They were neither expected nor unexpected.  Any other stance would be ignorant of the market's most important rule: anything can happen tomorrow and everything we know about what might happen is already priced-in today.  It's more fair to say the breakouts were "counter-trend."  

At the end of last week, the base case was for the ending of the trade negotiations in Washington to coincide with a market rebound  based on the fact that the sky wasn't falling even though we didn't get any major progress toward a trade deal.  The counterpoint was that this outcome was so obvious that it could create crowded trading positions and thus open the door for a contrarian contingent of traders to force bonds into a short squeeze.  Indeed, much of the extra oomph seen in bonds this morning (10yr yields well past Friday's lows while stocks have yet to break theirs)is attributable to short covering, but the general decline in stocks continues to mirror bonds.  That suggests the "risk-off" trade is still alive as this week begins.

US econ data may have some chance to add to the risk-on/off themes, but not until Wednesday at the earliest.  After 2 fairly quiet days in terms of data, Wednesday brings Retail Sales--the week's headliner--in addition to NY Fed manufacturing, Industrial Production, Builder Confidence, and Business Inventories.  Thursday adds Housing Starts /Building Permits as well as Philly Fed and Jobless Claims.  Things continue to die down on Friday, which only boasts Consumer Sentiment and Leading Economic Indicators.


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 3.5
101-08 : +0-08
Treasuries
10 YR
2.4030 : -0.0520
Pricing as of 5/13/19 9:53AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Tuesday, May 14
8:30 Import prices mm (%)* Apr 0.7 0.6
8:30 Export prices mm (%)* Apr 0.5 0.7
Wednesday, May 15
7:00 MBA Purchase Index w/e 270.2
7:00 Mortgage Refinance Index w/e 1238.5
8:30 Retail Sales (%)* Apr 0.2 1.6
9:15 Capacity Utilization (%) Apr 78.7 78.8
9:15 Industrial Production (%) Apr 0.0 -0.1
10:00 NAHB housing market indx May 64 63
10:00 Business Inventories (% ) Mar 0.0 0.3
Thursday, May 16
8:30 House starts mm: change (%) Apr -0.3
8:30 Building permits: number (ml)* Apr 1.290 1.288
8:30 Housing starts number mm (ml)* Apr 1.205 1.139
8:30 Philly Fed Business Index * May 9.0 8.5
8:30 Build permits: change mm (%)* Apr -0.2
8:30 Jobless Claims (k) w/e 220 228
8:30 Continued jobless claims (ml) w/e 1.680 1.684
Friday, May 17
10:00 5yr Inflation Outlook (%)* May 2.3
10:00 Consumer Sentiment May 97.5 97.2
10:00 1yr Inflation Outlook (%)* May 2.5
10:00 Leading index chg mm (%) Apr 0.2 0.4