The Day Ahead: All Eyes on Employment Data

It was a quiet overnight session with little data of importance and strikingly low volume when juxtaposed with yesterday's strong showing.  This would seem to suggest that markets wait with bated breath for this morning's Employment Situation Report, affectionately and more frequently referred to by it's chief component "NFP."  Expectations are for a rise of 150k, but economists estimate are in a range around that level.  While yesterday's ADP Private Payrolls report raises the possibility of a stronger private payroll component in today's report, the two are always divergent by some amount--some months greater than others with an especially high degree of variation around the holiday months.  There's a more detailed write up on the matter HERE.

Beyond NFP, markets remain subject to European headlines and events.  While nothing earth-shattering is expected or otherwise on the calendar, a relatively neutral reaction to NFP would leave markets somewhat more susceptible to Euro-drama.  Conversely the ongoing possibility of Euro-drama could greatly mute the market reaction to what otherwise might seem like a "big deal" jobs number.  Even muted, this one could still move the needle quite a bit.  Technically speaking, 10 year yields are just as entitled to move to 2.10 as they are to 1.87.  But the extent to which MBS would follow is less certain.  MBS, of late, have seemed to move less in either direction. The possibilities are endless...