The bond market considered rallying in response to this morning's weak jobs data--at least at first.  But it didn't take long for the bears to take over, ultimately pushing 10yr yields up and over 1.10% by the 3pm CME closing bell.  The subtle saving graces inside the jobs report were only part of the reason.  The bigger concern or perhaps the bigger question is whether or not this is evidence of that "sustained momentum shift" we were worried about heading into the week.  The answer is "probably not."  Not yet anyway, but it was/is enough weakness to cast some doubt.  If we're going to get a bounce that helps ease those concerns, it may depend upon how next week's Treasury auctions are digested.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Nonfarm Payrolls -140k vs 71k f'cast, 336k prev

  • Unemployment Rate 6.7 vs 6.8 f'cast, 6.7 prev

  • Wholesale Inventories 0.0 vs -0.1 f'cast

Market Movement Recap

08:21 AM

Bonds modestly weaker overnight with limited trading during Asian hours and a decent bounce back during European hours.  Yields were as high as 1.102 but are heading into NFP at 1.088%.  MBS are 2 ticks weaker to start the day (-.06).

08:44 AM

Initial paradoxical weakness after crappy jobs number, but recovering now to pre-NFP levels. Pretty big volume, but not a big reaction overall.

10:57 AM

The friendly bounce was short-lived and bonds have resumed their 3-day trend toward higher yields and lower prices.  At this point, momentum and technicals are just as much of a motivation as the broader notion of "repositioning."  Heavy corporate bond issuance hasn't been our friend this week either (traders also gearing up for Treasury supply next week).  MBS down .19 to new lows and 10yr up 2+bps at 1.10%+

12:49 PM

Modest, positive bounce now with MBS recovering about an eighth of a point from intraday lows.  10yr yields were as high as 1.126 and are now back down to 1.11%.  No major market movers behind the recovery (Fed's Clarida comments drove additional weakness around 11:15am ET though).

03:37 PM

No traction for the friendly bounce.  Bond weakness re-engaged for the 3pm CME close.  10yr yields still over 1.1% and UMBS 1.5s still down more than a quarter point.  3pm 'end-of-day' tradeflows brought the biggest hit, but both stock prices and bond yields have been rising since 1:30pm.