What To Make of The Post-NFP Rally

Nonfarm Payrolls (NFP) beat forecasts (850k vs 700k), which is normally something that would put upward pressure on rates.  While that seemed like a threat for the first 14 minutes, things calmed down nicely from there and bonds hit their early closing times with moderate gains intact.  Rather than try to force this outcome to fit some narrative (i.e. "this wasn't enough to derail the Fed's rate-friendly policies"), let's keep things simple.  The Fed has already been clear that NOTHING will be enough to derail those policies in the next month or three, so data like this merely helps shape the small scale trends inside a broader sideways range.  We should also take today's action with a grain of salt given the early close and 3.5-day weekend.  At least some of the movement could have been the simple result of position squaring as opposed to new trading ideas (i.e. traders packing things up for the weekend, not unleashing a bold new trading strategy in response to the jobs data).

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Nonfarm Payrolls........ 850k vs 700k
    Unemployment Rate... 5.9 vs 5.7 f'cast
    Participation Rate........61.6 vs 61.6 prev
    Earnings...................... 0.3 vs 0.4 f'cast
    Workweek................... 34.7 hrs vs 34.9 f'cast

Market Movement Recap
08:39 AM

Volatile reaction in a relatively narrow range after NFP.  10yr popped just a bit higher, then rallied to best levels (1.427) before bouncing back up to 1.461 (and now back down to 1.45).  MBS did the same back-and-forth and are currently 2 ticks (0.06) higher on the day.  Looks like bonds are still deciding how they feel about this.

12:01 PM

Very uneventful after initial post-payrolls volatility.  10yr yields have settled down on their 1.44% pivot point and haven't moved more than a bp in the past 90 minutes.  2.0 UMBS are up 3 ticks (0.09) and have been similarly flat.

03:00 PM

At or near best levels for the early close.  2.0 coupons ended the day up 6 ticks (.19) at 101-06 (101.19).  And 10yr yields dropped nearly 3bps to 1.431.  Solid showing given the NFP headline, but surprisingly uneventful in terms of volatility.