Bonds began the day in roughly unchanged territory.  On the one hand, that was impressive considering the lack of substance underlying yesterday's rally.  On the other hand, that lack of substance meant we were at risk of a bigger reaction to the Retail Sales data.

Retail Sales came out stronger than expected and bonds quickly retreated back in line with yesterday's weakest levels.  Notably, however, bonds never broke through to any weaker territory.  In fact, today's ceiling (2.143% in terms of 10yr yields) was slightly lower than the 2.15% ceiling from the past 3 consecutive sessions).  

The rest of the morning's economic data was a non-event, clearing the way for an asset allocation trade to benefit bonds in the afternoon (selling stocks and buying bonds).  Treasuries ended up clawing back more than half of the morning weakness and MBS made it almost all the way back to yesterday's latest levels.