Bond markets love negative economic data--especially when the Fed is ostensibly waiting for domestic economic data to merely hold steady in order to justify a rate hike.  But this morning's economic data goes a step further.  It provides a bond market boost not only because of its potential effect on the Fed's thought process, but also because of its implications on the broader economic outlook.

Long story short, the economy MIGHT be taking a turn for the worse.  The emphasis on "might" is both sarcastic and logically cautious.  It's sarcastic in the sense that the recent economic data has CLEARLY been painting a more negative picture--or at least a far less positive picture.  It's logically cautious because we've been through similar periods only to get sucker-punched by an abrupt turn in the subsequent data, along with revisions that undid some of previous conclusions. 

This time around, the sucker-punch looks less and less likely, especially when we factor in the global economic outlook.  And so it is that US 10yr yields are at 2% this morning in late 2015--the year that they were widely seen ending at 3-3.5%.  Even my own end-of-year forecast of 2.50 will end up being far too high if this really does prove to be a macroeconomic deceleration.  With Retail Sales coming in only +0.1 higher this month vs a revised 0.0 (previously +0.2) last month, and with Core Producer Prices falling to a +0.8 annual pace vs +1.2 forecast, the US is doing its part.

10yr yields are hovering around 2.0% and Fannie 3.0 MBS are up 6 ticks at 101-18.