MBS Live Recap: Bonds Bail Early For 3-Day Weekend

Happy Labor Day weekend, everyone.  Gotta close out some longs, but may jump back in on Tuesday.  

Cheers,
Bond Buyers

That's the short version of today.  It's not much different from the long version.  I suppose it would be considered poor form to not mention NFP after a week where some journalists and analysts went as far to call it "the most important NFP ever."

I'm proud to say I was fairly puzzled by that.  The most credit I would have given today's NFP was due to the fact that it happened to be occurring just as bonds are running out of room in their consolidative triangle (thus implying a greater likelihood of a salient reaction). 

But alas!  Even with all the high stakes drama-mongering, this NFP reaction would be hard to pick out of a lineup with other market movers.  Just in the past week, we've had 3 bigger days, thanks to Jackson Hole, its subsequent correction on Monday, and yesterday's ISM Manufacturing miss.  

The first reaction to today's NFP data was a move toward lower yields in bonds.  Shortly thereafter, yields bounced and drifted into the afternoon near their highest levels of the week.  This reversal is consistent with an abundance of "longs" (bets on bonds improving) deciding to close out ahead of a 3-day weekend.  Not an uncommon phenomenon when the rest of the world will be trading on the Monday while the US celebrates Labor Day.  It happened to work against ust this time, but it didn't change much about the bigger picture.  We're still on the less comfortable side of the recent range--still waiting to see which way we break.