Last week ended in ground-breaking fashion with bond markets clawing into positive territory despite a substantially better-than-expected Employment Situation Report.  It was the biggest beat that's ever resulted in a positive day for mortgage rates.

In searching for justification for such a crazy thing, the easiest place to turn at the moment is to geopolitical risk.  Developing events in Ukraine were certainly a factor in the rally, but we're left to wonder if they'd been the only factor in bond market demand, would we have still made gains?  In other words, did it take "something else" in addition to the Ukraine headlines to bring bonds back into positive territory?  Very likely.

We've talked about how traders can rapidly adjust positions at the end and beginnings of months, as well as leading up to Nonfarm Payrolls.  We had all three of those things happening last week.  We've also talked about how global bond market demand, especially for core European debt often informs and "spills over" into Treasuries.  With that in mind, it's worth considering that the benchmark for EU bond markets--German Bunds--have been declining more reliably and steadily than Treasuries.  There may be some "catch up" going on here (i.e. Treasuries catching up to Bunds after closing out April's trading).

European consideration will continue to play a role in US bond markets this week as the ECB (European Central Bank) conducts its monthly policy meeting on Thursday.  There has been increasing buzz surrounding the prospects for European QE, but it's not expected yet.  Potential market movement is more likely to come from Draghi's handling of questions during the post-announcement Q&A session beginning the same time as Jobless Claims are released (830am).  Fed Chair Yellen speaks before the Senate Budget Committee an hour later, making for busy morning on Thursday.

Before that, the data and event calendar are fairly light, leaving room to observe any legitimate focus markets may be paying to geopolitical risk.  Monday does have ISM-Non-Manufacturing data at 10am.  Apart from the Fed and NFP, this is one of the biggest potential market movers in terms of scheduled events.  Other events include Treasury auctions (3, 10, and 30yr), as well as another Congressional testimony from Yellen on Wednesday.