Yesterday the flight to quality deepened in reaction to pessimistic data from Germany and treasuries extended their rally, pushing the 10-Year bond to the lowest yield levels since June of 2013. MBA mortgage application rose +5.6% with Purchase down -0.7% and Refinancing gaining +10.6% for the week ending on October 10. The Producer Price Index advanced +0.1% in July, was unchanged in August, and today we saw a -0.1% decline for September. September’s PPI decline can be traced to the indexes for both goods and services, which moved down -0.2% and -0.1%, respectively. The Empire Manufacturing Index came in much lower than expected, declining to 6.17 from 27.54 level of last month vs. the consensus forecast of 20.25. Retail sales for September also decreased -0.3% from August vs. -0.1% survey. 10-Year notes are testing resistance levels this morning in reaction to the disappointing data, and the curve has bull flattened with 2s10s down -13 bps.
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