Markets May Be Underestimating Tomorrow's Jobs Report

Today's trading session was rather uneventful for bonds except for the fact that it resulted in the 6th straight intraday high in Treasury yields.  As discussed in the Day Ahead, this is right about the time that we begin to look for a technical correction simply due to probabilities of such streaks lasting more than 6 days.  Unfortunately for probability, this particular streak collides with big jobs report tomorrow.  Even though markets have seemed reluctant to react to econ data, the jobs report can always serve as a jumping off point for trading ideas and volatility.  Beyond that, the consensus forecast is arguably low based on the other available labor market data.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 779 vs 830 f'cast 812 prev

  • Labor Costs 6.8 vs 4.0 f'cast, -7.0 prev

  • Productivity -4.8 vs -2.8 f'cast, 5.1 prev

  • Factory Orders 1.1 vs 0.7 f'cast, 1.3 prev

Market Movement Recap
08:17 AM

MBS are unchanged to start the day (+1 tick or 0.03) while Treasuries are about 1bp higher after mixed trading overnight.  No major market movers in play as bonds wait for tomorrow's NFP, fiscal stimulus news, and next week's Treasury auction supply. 

09:29 AM

8:20am CME open brought bond weakness and that selling ran its course before the 8:30am econ data.  Since then, yields have corrected back toward unchanged levels, but 10yr is still up 1bp.  MBS are in slightly stronger territory.  Stocks are up about a quarter of a percent and trying to break intraday highs (in futures) at the 9:30am NYSE open.

01:50 PM

Quiet morning after the initial correction back toward stronger levels.  Now a quiet afternoon with 10yr yield just shy of unchanged and UMBS 2.0 coupons up 2 ticks (0.06) at 103-03 (103.09).