MBS MID-DAY: Big Improvements for Bonds After NFP; Early Close

NOTE: This is the mid-day and the 'recap' as bond markets are not only closing early (noon ET), but were effectively closed after the initial NFP reaction. 

Traders were only here for one thing today: NFP.  It was a good day to show up considering the magnitude of the miss.  Nonfarm Payrolls plummeted to an eye-watering 126k versus expectations of 245k.  Markets had been gearing up for weakness, but nothing could or should have been done to prepare for this level of weakness. 

Even the weather-blaming crowd is left without a leg to stand on today.  The data has internal components that track how many workers report not being able to work due to weather.  While that number was higher than last month, even if we added the difference to the total, we'd be left with 167k payrolls, which still would have been shockingly weak.  The fact that revisions took away another 69k payrolls only solidifies that point. 

Unsurprisingly, bonds rallied sharply after the data.  Also unsurprisingly, we're left with further confirmation of the importance of 1.84-1.86 as an inflection point for 10yr yields.  The initial rally took yields as low as 1.802, but they moved back up to 1.84 by the end of the session.  Fannie 3.0 MBS rose 12 ticks (.375) to 102-21. 

Keep in mind that most of the free world was out of the office today, so there's a significant trading response left to come next week, both at home and abroad.  We'll need to watch 1.84 very closely.  Any marked weakness from there would be disconcerting from a technical perspective.