Reasons For Hope And Caution Heading Into 3-Day Weekend

First off, "hope" and "caution" have different meanings depending on whether they're applied to rates or the economy (i.e. what's hopeful for rates is generally cautionary for the economy).  For instance, today's Retail Sales number was FAR below expectations and it helped bonds further distance themselves from the highs seen earlier in the week after CPI.  We wouldn't abandon caution just yet though.  Yields clearly avoided any serious confrontation with the pre-CPI ceiling.  By the time we consider that in conjunction with risks from econ data and the uncertainties surrounding 3-day weekend trading dynamics, it seems much safer to view bonds as being in more of a sideways stance (for now) as opposed to the first few steps of a bigger recovery.  

Econ Data / Events
    • Retail Sales
      • -0.8 vs -0.1 f'cast, 0.4 prev (revised down from 0.6)
    • Jobless Claims
      • 212k vs 220k f'cast, 220k prev
    • Import prices
      • 0.8 vs 0.0 f'cast, -0.7 prev
    • Export Prices
      • 0.8 vs -0.1 f'cast, -0.7 prev
    • NY Fed Manufacturing
      • -2.4 vs -15 f'cast, -43.7 prev
    • Philly Fed Index
      • 5.2 vs -8.0 f'cast, -10.6 prev
Market Movement Recap
08:49 AM

Much stronger after retail sales data.  MBS up 10 ticks (.31).  10yr down 6.7bps at 4.178.

11:32 AM

Giving back some gains with 10yr down only 1.1bps now at 4.234.  MBS still up 3 ticks (.09) but off 6 from the highs.

02:09 PM

Edging back toward stronger levels.  MBS up a quarter point on the day.  10yr down 3.7bps at 4.208.

04:17 PM

little changed from previous update

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