On Wednesday, bond markets digested two of the week's most important economic reports in the from of ADP employment and ISM non-manufacturing.  Appointments of new central bankers in the US and Europe provided a modestly positive backdrop while the econ data helped the gains extend.  The net effect was a move to new long-term lows for 10yr yields (lowest since Nov 2016).  MBS prices made it to new highs since Sep 2017 and are almost back to the Nov 2016 levels.

In the day ahead, to say "all eyes are on NFP" would be an understatement, and perhaps an overstatement.  It's an understatement because this is an incredibly important report due to its ability to confirm or reject the negative implications in last month's NFP (which came in at a measly 75k).  The labor market has been the saving grace for a US economy that has otherwise been showing signs of cooling based on the balance of other economic data. 

It's an overstatement because this is the day after the 4th of July and more than a few market participants remain out of the office for the busiest travel weekend of the summer.  Even if we see a strong reaction today, there could easily be more to follow next week.

Yields are freshly broken out of the consolidation range that began after the June Fed meeting.  As a part of that breakout, 10yr yields have also pivoted below 1.975.  This is essentially where we're beginning the day.  In that sense, a negative reaction to NFP suggests a break back into the recent range while a strong reaction would confirm the positive pivot.