Big Rally Just Getting Started or at Risk of a Correction?

Overseas markets added on to the rate rally inspired by Wednesday’s Fed dots and press conference.  That’s a common enough occurrence that it shouldn’t surprised us, but it doesn’t carry any conclusive implications for domestic trading.  For instance, we would be well within our right to worry that a strong Retail Sales report could derail the rally.  Indeed, sales data was strong and there was a brief selling response in bonds, but the glacial momentum of the “pivot” trade was not to be deterred.  Is this just a follow-through day that’s destined to give way to a consolidation bounce or is the pivot trade just getting started?

Econ Data / Events

Retail Sales

0.3 vs -0.1 f’cast, -0.2 prev

Jobless Claims

202k vs 220k f’cast, 221k prev

Import Prices

-0.4 vs -0.8 f’cast, -0.6 prev

Market Movement Recap

08:34 AM Rally extends overnight. Modest pull-back after data.  10s down 4.9bps at 3.975.  MBS up a quarter point.

09:48 AM Bouncing back a bit from post-data weakness.  MBS up 10 ticks (.31) and 10yr down 8bps at 3.943.

01:40 PM Broadly flat, trading in the middle of today’s range.  MBS up 9 ticks and 10yr down 8.8bps at 3.936.

03:44 PM Off the PM lows now with MBS up a quarter point on the day.  10yr yield down 11.8bps at 3.906.