It's that time again.  Or, at least it will be next Friday.  After 2 months in a row of painful NFP reactions in bond markets, the big jobs report is back again.  The Fed has probably done some work toward decoupling rate-hike expectations from payrolls, but even before that, the previous reactions still bigger than they should have been according to previous Fed rhetoric. 

Getting back to today's events, we only really had GDP and Yellen's afternoon comments.  Yellen expressed concern about wages and inflation, but only if they weaken from current levels.  If they don't, she stuck to the same recent script, saying the Fed doesn't need to see these metrics improve in order to hike rates.  With next week's NFP in mind, Yellen also mentioned there is still "some way to go" before reaching the Fed's employment goal. 

I'm not really sure what that goal is any more.  Are you?  Back when the unemployment rate target was in the announcement, that was clear enough, but as soon as we blew through that unemployment rate with essentially no change in Fed accommodation, shouldn't we logically conclude that the unemployment rate isn't that big a deal for the Fed?  Where else to look then?  Yellen herself has called out the lack of wage inflation, but then today says she doesn't need to see it in order to justify a rate hike.  Surely the Fed won't just be looking at one metric in deciding when the employment goal has been met, but it would be nice if there was some more clarity on what metrics are being leaned on most heavily.

Perhaps all of the unanswerable questions above account for the lack of reaction to Yellen in bond markets.  That put her speech in good company today.  GDP met a similar fate, coming in at +2.2 vs +2.4 forecast and doing nothing to nudge the trading range in either direction. 

Here's the only thing that jumps out at me all week: LIQUIDITY!  THERE IS NONE!  I've never seen more evidence for bond markets being relieved (or motivated to trade, rather) simply because the opening bell rings at the NYSE.  Of course stocks are trading nearly 24 hours a day in futures, and S&P futures especially are the preferred playground for traders that move markets (even during NYSE hours), but the NYSE undeniably brings a feast of liquidity to markets. 

Even though there's not necessarily a lot of bond-specific liquidity there, many of the accounts that become active at 9:30am also occasionally buy or sell Treasuries (or other financial instruments that have an indirect position in Treasuries).  It's been more than enough to register a reaction that can't really be chalked up to anything else in this environment.  Bottom line, the 15 minutes of trading following the NYSE open saw bigger volume and participation than the 15 minutes following the GDP release.    This liquidity story will continue to be relevant (and don't forget it exacerbates days like the past 2).