Generally higher yields and tepid intraday performances are nothing new for bond markets over the past week and a half.  In some ways, today marked a mere continuation of that trend and even offered some silver linings.  In other ways, it kicked the weakness into a slightly higher gear ahead of tomorrow's jobs data.

In terms of silver linings, intraday yields managed to hold below the intraday highs seen on 3 other recent tradings sessions (beginning with September 28th).  That could be taken as evidence that bonds are consolidating and haven't really made up their mind.  Moreover, bonds have been able to do that even as stocks have embarked on a rather impressive run to new all-time highs, with today being the most impressive of the lot.

If you stop reading after the previous sentence, the outlook is fairly decent heading into tomorrow.  If you keep reading, you'll be forced to consider that today's closing yields were the highest since early July and that technical momentum indicators are fairly unified in conveying an absence of reversal cues.  In other words, bonds have quickly gotten comfortable with these new, higher levels.

Tomorrow's jobs data is decreasingly important in a world where the Fed is primarily looking for inflation (and where job growth and even wage growth have had a frustratingly tenuous relationship with inflation).  That doesn't mean the headline won't move markets (it usually does, simply because "big trades following NFP" is one of America's pastimes--at least for bond markets), simply that NFP isn't likely to serve as lasting source of inspiration.  

On a final, downbeat note, I would point out that there is asymmetric risk associated with this particular NFP because a weak reading can be explained away with Hurricane impacts whereas a big beat couldn't be anything but bad for bonds.  Granted, it COULD BE the case that traders are waiting for NFP before getting back into bonds simply for strategy purposes, but A) we won't know that until after the data tomorrow and B) it's not the kind of thing you want to bank on from a lock/float standpoint--at least not when yields just closed near 3-month highs.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.5
103-00 : -0-06
Treasuries
10 YR
2.3480 : +0.0160
Pricing as of 10/5/17 4:57PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
12:12PM  :  ALERT ISSUED: Reprice Risk Becoming More Widespread
10:39AM  :  ALERT ISSUED: Negative Reprice Risk Beginning to Increase
9:39AM  :  Bonds a Bit Shaken by Williams Comments

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Matthew Graham  :  "I don't see how NFP is a major consideration for bond markets these days, apart from intraday volatility. It doesn't do much to contribute to or detract from any of the relevant themes--not yet anyway. It will cause short-term market movement because of its pedigree. The exception would be a much stronger-than-expected report, which wouldn't make a ton of sense given the hurricane impacts assumed to have taken a toll on NFP survey week."
Matt Hodges  :  "at this point, it feels like getting past bond supply - lets just get past NFP tomorrow"
Christopher Stevens  :  "5 things to watch in Sept jobs report- https://blogs.wsj.com/briefly/2017/10/05/5-things-to-watch-in-the-september-jobs-report-3/"
Matthew Graham  :  ""I do like a low-interest rate policy.""
Scott Valins  :  "define identify please"
Matthew Graham  :  "yes"
Scott Valins  :  "Did he identify with Yellen?"
Matthew Graham  :  "I think SOME non-Yellen uncertainty is adding to bond weakness. But what the Fed does will ultimately be limited by what the economy does. In other words, even a hawk won't be able to justify hikes if it's strangling the economy. I also don't imagine Trump will want a "high rate person" after previously identifying with a "low rate person.""
Ray J  :  "man, feels like a Friday ahead of a holiday weekend."
Scott Valins  :  "Is a non-Yellen (assume more hawkish) new Fed chair getting priced in yet or would that confirmation make yields pop?"
Adam Dahill  :  "locked a few floaters that were getting away from me. Rally away gents!"
Scott Valins  :  "the battle of 2.357"
Nathan Miller  :  "10yr holding pretty tough at mondays lows, mbs not so much"
Sergio Szyrko  :  "seriously, what the heck...can't catch a break the past few weeks LOL. trend is DEFINITELY not our friend (where have I heard that before?)"
Scott Valins  :  "let's bounce here please"