The first order of business this morning was to reconcile the weaker NFP reading with the seemingly illogical bond market sell-off. That was easy enough to do by the time we considered the solid drop in unemployment along with the big revisions to the past 2 months of payrolls. It was all the more palatable due to the modest size of the sell-off (especially modest as far as jobs report days are concerned). Thanks to the rally earlier in the week, bonds are still set to end the week at slightly stronger levels. Bottom line, volatility is minimal. Next week's CPI is the only other report that can hold a candle to NFP when it comes to rocking the bond market's boat.
First move after NFP is weaker. MBS down 5 ticks (.16) and 10yr up 3.7bps at 4.478
10:57 AM
off the weakest levels after Trump's reciprocal tariff headlines. MBS still down a quarter point and 10yr up 4.8bps at 4.489
01:05 PM
Classic PM sideways fizzle in progress. MBS still down a quarter point and 10yr drifting sideways just under 4.50.
Lock / Float Considerations
With Friday's jobs report out of the way, Wednesday's CPI becomes the next major volatility risk in the near term. The jobs report likely serves a role to offer resistance to the recent bond rally as opposed to define an entire month of momentum (as jobs reports can sometimes do). If anything, CPI is slightly more likely to shape prolonged trends. This doesn't mean CPI is any more likely to help or hurt, simply that it's at least as big a risk/opportunity than jobs, if not bigger. In the short term, there's not a great calendar-based opportunity for a strong recovery until and unless CPI comes in weak.
