Living under a rock has a lot of advantages: generally low housing cost, durability, no roof maintenance, and if you're strong enough, you have something to throw at anyone who approaches your castle in a threatening way.  The disadvantages may be slightly more numerous, but I can only really think of one right now: the lack of access to timely market-related news!

All that nonsense to say: unless you've been living under a rock, you've probably heard or seen that mortgage rates and/or MBS are doing an absolutely lousy job of keeping pace with the move in the Treasury market.  Even from under said rock, you could still probably hear other people whining about this dynamic, so you really have no excuse not to know.

Despite our knowledge of this general phenomenon, reality is still finding ways to surprise us on certain days.  For many, today was one of them.  Case in point, 10yr yields down 12bps to 1.58% and many mortgage lenders UNCHANGED from yesterday?  If you haven't seen it already, the best commentary I can offer you on that is in the Huddle Video.  

As far as today's nuts and bolts, there really weren't any in the domestic session.  The important stuff happened overnight with weaker data in Europe and China. Of those two, it was rapidly tanking EU yields that did the most to spook US markets.  Stocks tanked mightily and Treasury yields followed suit.  MBS, of course, traded in the same range as yesterday because who in the world is going to pay MORE for something that's even more likely to be paid off earlier than normal some time in the next few months.  If that last sentence didn't make sense, check out this primer.

From an economic standpoint, the world is on the lookout for recession indicators.  In that regard, the consumer is one of the last bastions of strength.  That makes tomorrow's Retail Sales report more important than normal.  It also suggests good asymmetric risk for the bond market as an exceptionally strong report would have to be insanely strong to matter much against the raft of economic concerns.  Conversely a weaker report will look like some sort of ill omen for the economy.