First Friday of the month and time, once again, for The Employment Situation Report, or more specifically, the Non-Farm Payrolls headline.  Both Manufacturing and Private payrolls are expected to have fallen somewhat from last month's report with the 200k headline falling to 150k.  With both stocks and bonds near their best levels in about half a year, there aren't the usual foregone conclusions about a positive report hurting interest rates or a negative report hurting stocks.  Without being overly optimistic about the team for which we cheer, it seems like Treasuries and MBS would have an easier time keeping a bid in the face of threatening data. 

To clean up that hypothesis a bit, let's say NFP comes in between 150-200k, beating the 150k consensus.  Historically, such a result would tend to lead rates higher, but in the current environment where we've seen more of a leveling off in the broad swath of other domestic economic data,  where last month's report printed 50k higher than this month's consensus, and where an unprecedented level of demand for US Treasuries continues unabated until Europe is "fixed," it doesn't seem like a beat that falls in that 150-200k range is the end of the low-interest rate world.  Granted, even a bigger beat would be hard pressed to cause the end of low interest rates, but the moral of this story is the "underlying default positivity," (or whatever you want to call it... we give up) that pervades US Treasuries and even MBS. 

But what would happen to stocks if NFP misses the consensus.  The recent rally in stocks is impressively stable, almost indicative of it's own version of the "underlying default positivity" (Buy American?).  But we can't help but think that the print needs to hit at least 150k (or have some favorable "yeah buts" in the internal components) for stocks to come out ahead tomorrow.  Then again, we're probably setting ourselves up for disappointment by trying to apply logic to equities.  Maybe we should stick with bond markets. 

With that in mind, logic dictates, well... we're not sure.  All we really know is that Treasuries are at the more aggressive end of a flat range or a bullish trend channel.  Either way, left to their own devices with no NFP tomorrow and no Europe, yields would probably bounce higher and MBS prices would probably fall.  So whatever the suggestion from NFP, it will need to speak loudly enough in favor of economic uncertainty if we're to maintain recently achieved all-time highs in MBS tomorrow.  It COULD do this even with a 150k print, but the higher it is from there, the more and more challenging our day becomes, probably. 

There's other data after the 8:30 AM Jobs report (Factory Orders and ISM Non-Manufacturing), but we're not planning on paying much attention to it unless NFP leaves us woefully desirous of additional economic clarification.  On the other hand, for the first time in a few months, it feels like we're heading into Jobs data with the distinct risk of going sideways or weaker, and with less developed speculation/hopes of bond markets strengthening on a lackluster report.