MBS Day Ahead: Bonds Near Important Technical Levels Ahead of NFP


NOTE: This paragraph will be at the top of the Day Ahead for a few weeks.  Once you’ve read it, feel free to skip it.  The Day Ahead has long been my venue to offer deep thoughts with a mix of big-picture and near-term technical considerations.  I’ll still be doing that, but in posts on MBS Live and under the ‘General Commentary’ heading (which still shows up on MND for free, but delayed).  The Day Ahead will quickly evolve into a more cut and dried run-down of the events of the day (as it should be).  Some days are more interesting than others, so some posts will be almost comically short, depending on the slate of events.  It will still contain charts from time to time, but generally just to lay out technical levels we should be watching.  

This morning’s NFP data is expected to come in at 178k vs a previous reading of 178k.  The unemployment rate is expected to tick up to 4.7 from 4.6 and average hourly earnings are expected to rise 0.3 percent vs last month’s 0.1 percent decline.

NFP varies greatly as to its effects on markets.  Certainly, it’s always the biggest POTENTIAL market mover on any given month in terms of scheduled economic data, but there are plenty of examples where it’s failed to produce much movement.

It really doesn’t look like financial markets are too terribly interested in trading the economic data recently.  The caveat would be that some of yesterday’s data made some traders think today’s NFP could come in worse than expected.  

Whatever happens, we can continue to watch our set of important technical levels to gauge the progress of any rally or sell-off.  If 10yr yields are breaking and holding below 2.34, that’s good, 2.29 is better, and 2.18 (unlikely today) would be best.  In defensive terms, we’d be looking for support at 2.42% or below in order to keep hope alive for broader, positive momentum to start the new year.

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