Last week ended with a paradoxical reaction to a jobs report that was much stronger than expected. Although bonds did lose ground at first, they ended up coming back to even better levels by the end of the day. Nonetheless, the week's theme was "slow and steady losses" for bonds after 3 straight weeks of improvement.

Now this morning, the bond market is starting out in slightly weaker territory again.  It does so even as several closely-watched states continue reporting elevated COVID-19 metrics and as the threat of a protracted economic impact remains very much on the table (continued jobless claims remain near 20 million).  

The market movement may seem out of sync with the economic threat, but the real threat here is that everything is happening in a relatively logical fashion.  Several states do indeed have somewhat alarming increases in covid metrics, but they also had an easing of quarantine measures before that.  More spread of the disease is a logical consequence.  It only becomes a major issue (one that's big enough to help bonds continue to lower yields) if those states don't see the numbers begin to level off.  

The jury remains out.  It's too soon to say if we're merely seeing a logical byproduct of less social distancing or early evidence that quarantine measures will need to be reintroduced due to our inability to properly manage the reopening(s).  The fear of that inability is what helped bonds return to strong levels by the end of June.  The possibility that the fear was premature is setting bonds up for an unfriendly bounce in the event covid numbers level-off in the hotbed states.  

Bottom line, it has been and continues to be the case that the fate of the bond market rests with our ability to successfully reopen the economy and stem the tide of covid numbers.  The imperfect success of those goals allowed us to remain in a persistently excellent range.  If our level of success seems to be changing, so too will the trading range.

The week ahead isn't teaming with top tier econ data releases.  Today's ISM Non-Manufacturing is the biggest of the lot, and there's nothing else on the "top tier" list.