• Retail Sales +0.8 vs +0.6 forecast (previous reading revised to 1.0 from 0.6)
• Empire State Manufacturing +1.5 vs -2.5 forecast 
• Import Prices +0.5 vs +0.4 forecast

All three of the reports at 8:30am were stronger than expected.  The internal components of Retail Sales were especially strong with the core reading coming in at +0.8 vs a consensus of +0.3.  Revisions to last month's numbers were strong across the board.

Bonds sold-off just a bit initially, but bounced back toward pre-data levels shortly thereafter.  What's up with that?

As you might have inferred from the past 3 days of market movement, traders have found other things to trade apart from data.  With fiscal/monetary policy speculation and fears of worst case scenarios in December driving such a big move in bond markets, the serendipitous corrections to that move can easily outweigh any impact from data.

This doesn't necessarily mean that bonds are dead set on rallying today though.  It's quite troubling that our first overnight rally during this move was so shallow.  Yesterday, we were looking for a break below 2.18 to confirm a potential bounce.  We didn't get it yesterday, and we didn't get it overnight (despite trying AGAIN and getting turned away at 2.182).

The aversion to a break below 2.18 speaks to an unwillingness on the part of traders to chase the typical correction.  Perhaps that's why yields have already moved back above pre-data levels in the time it's taken me to write the last 2 paragraphs.  

Stay cautious--especially if you have some improvements on this morning's rate sheets.