Retail Sales rose 0.4% vs a median forecast of +0.6%.  Excluding the more volatile components, sales rose 0.2% vs a median forecast of +0.4%.  That was the first piece of good news for bond markets this morning.

The other piece of good news was the weaker-than-expected Consumer Price Index (CPI).  Headline CPI was actually in line with expectations at +0.2%, but core year-over-year CPI came in at +1.9 vs +2.0 forecast.

10yr yields rallied several bps to hit lows of 2.359 before bouncing just slightly to 2.364.  They'd been trading close to 2.38% just before the data.  Fannie 3.5 MBS are up an eighth of a point to 102-11 with half of the gains coming after the data.