MBS Live Recap: NFP Didn't Matter

I have a lot of great thoughts and analysis about today's market movements.  Most of those were disseminated via MBS Live throughout the day--especially in the Huddle video--as well as via marketnewsletters.com.  (If you haven't tried MBS Live, you missed out today, and this month in general.  Check it out.  There's a free trial.  Let me know if you don't see how it will pay for itself over time and I'd be happy to walk you through it). 

Moving on to analysis...

This morning I said NFP didn't matter.  Bonds promptly underwent a vicious little sell-off immediately following NFP.  

Now this afternoon, I will tell you again that NFP didn't matter.  I'm not doubling down.  Here's why (in the simplest possible language I can think of):

NFP didn't conjure up the water.  It was simply a b.

Bonds didn't sell-off because of any implication from the NFP data.  I heard a lot of talk in the financial news and even among analysts about stronger wage growth numbers.  Poppycock!  The wage data was almost perfectly in line with forecasts.  The monthly growth was right on target.  Analysts called attention to the strongest year-over-year growth of the recovery.  Well duh!  All wages had to do for that to be the case was to merely fall in line with the median forecast.  This was an AS-EXPECTED result.

NFP is a market institution like no other.  It's the king of economic data.  It's in a period of subdued relevance because we all know the labor market is firing on all cylinders as far as economic data can convey.  NFP is a special moment each month that many traders will use as a staging ground for the execution of their next big trading idea.

While it wasn't necessarily obvious on the approach, hindsight makes it clear that the early February trade has been to sell bonds aggressively after being forced to hold more bonds at the end of January.  Lest ye think I'm saying that in light of today's move, it was the focal point of yesterday's analysis as well.  NFP has enough street cred that traders held back their selling on the chance the report bombed.  It didn't bomb, so the floodgates were open.  

We also happened to hit this morning on a technical ledge in yield curve trading.  NFP came out right as the curve was set to break above that ceiling.  The breakout brought extra volume and selling pressure in the morning.

All of the day's selling was accomplished in short order.  There were no new yield highs after 10am, but also no attempt to make new lows.  Things are bad and will continue to be bad until they get good again.  The first head-fake back in a good direction will be just that.  When we're really getting back to good, you'll know it, and I'll be talking about it.