Yesterday

- Extremely light volume; Data mattered very little

- Most trading surrounded the Fed's daily buying operation

- Pending Home Sales were negative year/year, 1st time in 29 months

- Factoring out homebuyer tax credit, Pending Sales were much much worse

Today

- Expecting a bit more activity due to more robust data offerings

- Focal points on Retail Sales (830am) and Consumer Confidence (10am)

- 5yr Treasury Auction is a supporting actor, but no star

- Bond Markets look "ready to rally" if given a reason

Strategy

From the standpoint of trading levels, yesterday was meaningless.  Both Treasuries and MBS remained inside the ranges set by Friday's highs and lows.  Data had limited effect and the biggest volume was seen surrounding the Fed's scheduled Treasury buying operation.  That's a clear-cut indication of day that may as well not have happened.  Pending Home Sales at least made it worth tuning in (more on that in the "charts" section below).

Today should make up for yesterday's boredom.  At the very least, it stands a better chance.  Retail Sales is the focal point of the day from a data standpoint with Consumer Confidence helping round out the morning.  As has been the case for several years now, Producer Prices are essentially worthless when it comes to suggesting interest rate directionality.  At this point, it's going to take a concerted effort across several inflation metrics before anyone cares.  That said, a lot of old dogs still care due to force of habit, but that doesn't mean they should or you should.   So focus on Retail Sales at 8:30am.

If the beat or miss is big enough at 8:30, that may well set the tone for the day.  Consumer Confidence is notable in that it's an October report, whereas the others are September (except Case Shiller which is August).  This either means it will matter more or that it will be disregarded as overly distorted by the shutdown. 

The 5yr Auction at 1pm can provide a moderate course correction in the afternoon hours but isn't the same sort of market mover as the morning data.

Charts

The only saving grace to yesterday's boredom was the Pending Home Sales report, which was interesting enough to mention today.  Reason being: the attention-grabbing headline in the report was the 29-month gap between yesterday and the last time the year-over-year (y/y) change was in negative territory.  But what happens when we factor out the effects of the homebuyer tax credit? Long story short, it was the first time the y/y total crossed into negative territory since 2008.  That 2008 report was an outlier to boot, and a closer look at the chart shows yesterday was more realistically the first of its kind since mid 2005 (a move into negative territory after a prolonged stint in positive territory).

Between this week and next, 10yr yields are likely to "decide" whether or not to remain in this central zone of the retracement levels below.  If they break lower, 2.31 is the next significant weekly closing yield, though there are shorter term technical levels around 2.42 and 2.25.