Today brought resolution (probably) for a problem that had been greatly benefiting bonds and rates.  Earlier this week, the prospect of snap elections in Italy threatened to stand as a de facto referendum on the country's EU membership.  Bonds loved this because a systemically-doomed EU is a great motivation for safe-haven bond buying, not to mention a general economic headwind.

Today, Italian officials quietly agreed on alternate nominations that would clear up the political gridlock and help avoid the much-feared elections. Perhaps that news broke too late in the day for European markets to react much.  Perhaps it was offset by other bond-friendly developments (such as new tariff announcements or troubling revelations for Deutsche Bank).  Perhaps it was all a bit too sudden and convenient for traders to turn on a dime.  Whatever the case, bonds didn't have nearly as bad of a reaction as you might expect based on how the news was traded earlier in the week.

This creates obvious risks for tomorrow--especially when combined with an uncertain market reaction to NFP as well as the general phenomenon of "new month" trading.