Some Asymmetric Risk When it Comes to Locking vs Floating

Bonds improved today mostly in response to heavy stock losses creating some safe haven buying demand. Data wasn’t heavily traded, but it didn’t do any harm. Producer Prices were mixed, with an upward revision in September being offset by lower-than-expected inflation in November. Retail Sales (also November data) beat at the headline, but the control group (excludes autos/gas/building materials) was in line with estimates and October’s number was revised lower. Despite the bond gains, mortgage rates were unchanged. This offers a potential clue about lenders being resistant to the notion of offering meaningful improvements from current levels in the short term.

Econ Data / Events

Core Producer Prices MM (Nov)

0.0% vs 0.2% f’cast

Core Producer Prices MM (Oct)

0.3% vs 0.1% prev

PPI YoY (Nov)

3% vs 2.7% f’cast

PPI YoY (Oct)

2.8% vs 2.7% prev

Producer Prices (Nov)

0.2% vs 0.2% f’cast, 0.1% prev

Producer Prices (Oct)

0.1% vs 0.3% prev

Retail Sales (Nov)

0.6% vs 0.4% f’cast, 0% prev

Retail Sales Control Group MoM (Nov)

0.4% vs 0.4% f’cast, 0.8% prev

Market Movement Recap

09:11 AM No major reaction to AM econ data. MBS up 1 tick (.03) and 10yr down 1.6bps at 4.165

11:23 AM Best levels of the day with MBS up 5 ticks (.16) and 10yr down 4.2bps at 4.138

01:58 PM Little changed from last update. MBS up 5 ticks (.16) and 10yr down 4.7bps at 4.133