Bond markets got off to a volatile start yesterday, but ended the day close to unchanged. There's really very little that Treasuries could do at the moment to change the the perception that they're sideways and waiting for the next big move. We discussed this in greater detail yesterday: Serious Monotony Problem for Bond Markets; Time to Move on?
NFP (nonfarm payrolls, the headline component of the all-important Employment Situation Report) is this Friday, and on NFP weeks, it can be hard for much else to have a meaningful impact. Think of of a crowd of spectators gathering for a big fireworks show. Lawn chairs and blankets are set up. Prime territory is staked out. Viewing angles are verified.
But between the set up and the start of the show (depending on the location), it's not uncommon for amateur pyromaniacs to light off some of the choicest offerings in their Costco mega pack. Just as the people who have set up their viewing operation for the big show are unlikely to make any major adjustments to view the Costco fireworks down in the street, so too are market participants usually unwilling to make any major adjustments for the lesser fireworks represented by the economic data of the first four days of the week.
Big bangs are caveats. If something is loud enough, it will get everyone's attention. People watching fireworks still probably won't be moving their chairs to observe little Johnny's homemade mortar show, but they'll certainly turn and look.
All that to say that if there's any economic data out there that can play the role of little Johnny's homemade mortar show, it's the ISMs. That includes the Manufacturing version today and the Non-Manufacturing version on Thursday. While it would be extraordinary if these conspired to create a meaningful break in the sideways range AHEAD of NFP, it's entirely possible that they'll look like they're trying. It all depends on how loud of a bang they make. Given today's 54.0 forecast for ISM and the recent range seen in the chart below, that would likely require something near 50.0 on the low end and 58.0 on the high end.
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