On the first week of most any month, the focal point for bond market trading is unquestionably Friday's Nonfarm Payrolls (NFP)--and with good reason.  It's the single most important piece of economic data for US markets.  Major economic reports are usually the most important considerations for bond markets.  But not this week.

As early as April 4th, the potential for the European Central Bank (ECB) to embark on some form of quantitative easing, along with rate cuts, was already on our radar.  In fact, I went so far as to label it the day's biggest market moving consideration, even though it was an NFP day!  (original April 4th coverage).

Since then, market participants and TV's talking heads have come to a unanimous agreement that this week's ECB meeting is a very big deal.  To be sure, it was a pretty easy consensus to come to after Draghi said the council was "ready to act at the next meeting" (which we covered HERE).  

Central bankers at home and abroad have frequently said "ready to act," and sometimes they even go so far as to specify a time vague time frame, but we haven't heard Draghi, Bernanke, Yellen, or anyone else that matters actually specify a single point in the future for possible massive action.  More than a few traders feel that Draghi was overly aggressive in letting the cat out of the bag during that press conference.

The following week, there was a massive rally that broke MBS and Treasuries out of their intermediate-term ranges and the week after that, another massive rally that temporarily broke 10yr yields below the significant 2.47 inflection point.   As I discussed HERE, 2.47 is really just the leading edge of a range of yields centered on 2.40, and with a lower bound at 2.33.  Here's another, cleaner look at that inflection point with just one line on 2.40:

Needless to say, with yields approaching that epic inflection point and the European Central Bank possibly preparing to announce quantitative easing, this week could be pretty huge.  The biggest risk is that markets may have 'priced in' some amount of ECB easing this Thursday.  In that case, if even if the ECB lowers rates and announces asset purchases, it still might not be viewed as a net-positive for bond markets at current levels.  If momentum is undecided by Thursday morning (ECB is at 7:45am), then we get NFP the following morning to break the tie.  Even before that, Monday's ISM Manufacturing Index and Wednesday's ISM Services Index are no slouches.  Potentially a very big week...