Bonds Push Back Against Stronger Employment Data, But Tomorrow is a Different Fight

Bonds got off to a weaker start today following 3 consecutive upbeat labor market reports (Challenger, ADP, and Jobless Claims).  Yields managed to find a ceiling with the 10yr in the high 3.7s and ultimately made it back down to the low 3.7s by the close (only a few bps higher on the day).  MBS made a similar recovery.  Some sources cited "new year" inflows for bond funds.  Comments from Fed's Bullard helped a bit as well.  Still, the most important observation for today was the willingness to react to labor data because tomorrow's jobs report is an infinitely more tradeable event than today's 3 reports combined.

Econ Data / Events
    • ADP Employment 
      • 235k vs 150k f'cast, 127k prev
    • Jobless Claims
      • 204k vs 224k f'cast, 223k prev
    • Trade Gap
      • -61.5bln vs -73.0 bln f'cast, -77.85bln prev
Market Movement Recap
08:34 AM

Mostly flat overnight but losing ground after AM data.  10yr up 6bps and MBS down about 3/8ths.

09:33 AM

Additional weakness in MBS now, primarily a factor of illiquidity.  5.0 coupons down 18 ticks (.56). 10yr up 7.7 bps at 3.767.

11:32 AM

Decent push back over the past half hour with 10yr yields now up only 4bps at 3.731.  MBS are off the lows by about an eighth of a point, but still down 3/9ths on the day.

01:28 PM

Bullard comments helped a bit. 10yr now up only 1.5bps on the day at 3.705.  MBS down only an eighth of a point on the day.