The Day Ahead: Jobs Report Dominates Friday's Calendar Of Events

There's little left to do or say about today's Employment Situation Report except watch and react.  Thursday's sell-off brought MBS to the edge of their broader sideways range that has persisted for several weeks, so any additional selling pressure here will be more significant from a technical perspective.

MBS ranges notwithstanding, and even bearing in mind the varying levels of correlation since the QE3 Announcement, there's still a lot that 10yr Treasuries can tell us about the broader trends in the fixed-income universe.  Most recently, 10yr yields broke higher out of their recent sideways range on Thursday.  The previous ceiling was in the high 1.65's and yields went out just over 1.67.

This morning's NFP headline has all the potential in the world to trigger a confirmation or rejection of that breakout, with a confirmation very likely resulting in a test below 105-10 in Fannie 3.0 MBS.  As is always the case on NFP day, it's the POTENTIAL ENERGY that is through the roof, as opposed to there being a guarantee of big moves in one direction or another. The big potential energy can even work in both directions, making for extreme volatility that ultimately settles back to relatively unchanged levels. 

Recent employment-related data has been mixed with about half the reports (or employment components of other reports) pointing toward the stronger job creation called for in the NFP forecast.  NFP or "Nonfarm Payrolls," is the chief component of the official Employment Situation Report.  Forecasts call for +113 nonfarm payrolls to have been created in September, up from 96k in August.  The report will be released at 8:30am eastern time and as always, we'll have a live play by play on the MBS Live Dashboard.