In the day just past, bonds managed to hold perfectly flat despite several big-ticket market movers in play. These included the European Central Bank’s (ECB) announcement and press conference as well as the important ISM Non-Manufacturing data. The latter didn’t garner any significant response and the former only really created volatility in European bond markets before ultimately being traded completely out of the market (i.e. yields in Europe and the US both continued with their overnight trends by noon).
In the day ahead, we will find out how many eyes are indeed on NFP (“All Eyes on NFP” or “All Eyes on The Jobs Report” or some iteration of the phrase surely must be the most over-used headline in all financial news), the “nonfarm payrolls” component of the mighty jobs report.
To be sure, bonds have been trading exceptionally sideways since bottoming out at long-term yield lows on Monday. The bullish narrative has most to do with global growth concerns as they relate to tariffs. Job counts, on the other hand, are most useful as an indicator of an economic downturn and it would take more than one weak reading in NFP to raise the alarm. The wage growth component of the jobs report is also increasingly popular these days, but it was a bigger factor in 2017/2018 when some investors still believed inflation would take root any moment due to rising wages. We’ve since seen that the extra income is mostly going to higher rents and home prices rather than stoking inflationary fires.
Ceiling levels to watch in 10yr: 2.13% and 2.19-2.22% (the “gap”). Floor levels: 2.04-2.07%.