Bonds Definitely Daring Jobs Report to Surge

10yr yields are now decisively below the levels seen BEFORE the last CPI report (the one that caused a jump from the 4.1’s to the 4.3’s).  This has been accomplished without any shockingly downbeat econ data, and without the market ramping up bets on a friendlier rate trajectory from the Fed.  In other words, it’s some combination of supply/demand technicals (Treasury auction composition and Fed QT tapering effects) and, more importantly, a legitimate belief that economy is not at risk of reigniting inflation concerns. On that note, Friday’s jobs report is in a position to undo much of the recent improvement if it makes a strong counterargument.  The recent data and the bond market response are essentially daring the jobs report to surge.  

Econ Data / Events

Jobless Claims 

217k vs 215k f’cast, 217k prev

Continued Claims

1906k vs 1889k f’cast, 1898k prev

Market Movement Recap

08:37 AM Stronger on data and ECB announcement.  10yr down 3.9bps at 4.069.  MBS up 5 ticks (.16) before accounting for roughly 2 ticks (.06) of illiquidity.

11:49 AM Gains erased in moderate, steady volume, and before Powell testimony.  MBS up only 2 ticks (.06) and 10yr unchanged at 4.108.

02:37 PM Weakest levels just before 1pm and holding modest gains since then.  10yr down half a bp at 4.104.  MBS up 3 ticks (.09).

03:30 PM Near best levels in MBS, up an eighth of a point.  10yr down 1.6bps at 4.092.  Shorter-term Treasuries are doing even better.