Over the years the average jobs report week (typically the one with the first Friday of any given month) has a better chance than any other week to set a trading tone in the bond market. That was definitely the case in January, but it had almost nothing to do with the jobs report itself. The Fed has essentially already declared victory on its "full employment" goal (not that they think things are perfect--simply that further accommodation won't translate to the labor market during the pandemic).
This greatly decreases the focus on jobs data and several other econ reports that would otherwise be important. Instead, bond traders will be looking around the room to see how eager other bond traders are to put a lid on the current rate spike for the time being. Even if rates ultimately continue higher, that never happens in a straight line.
In the shorter term, there is a new consolidation pattern taking shape with multiple internal pivot points to watch. Yields would need to move well below 1.71 or well above 1.85 to challenge the boundaries of the current pattern.
Last but not least, let's check in with MBS performance as it has been a hot topic in January. As the Fed unveiled it's less friendly attitude toward bond purchases, MBS suffered more than Treasuries, but that underperformance has been cooling off over the past few days. Perhaps there is some value buying opportunity here that can help MBS valuations establish some support.