The most notable development on jobs day has stunningly turned out to be the trading that came before the jobs report in the overnight session.  Bonds embarked on a fairly big rally, ostensibly due to Silicon Valley Bank news.  10yr yields were roughly 10 bps lower before NFP came in at 311k vs 205k f'cast.  Anyone could be forgiven for think such a number meant trouble for bonds, but bonds paradoxically rallied (with an eye on higher unemployment and lower wages).

After a brief correction, the gains continued all morning, ultimately adding up to the biggest rally day since November 10th.

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But how much--if any--of this is due to the jobs report?  That's a tough call, but only inasmuch as deciding if we want to give the jobs report ANY credit.  It may deserve anywhere between 5-20%, but the market is clearly trading the SVB news.  One of the clearest indications of that comes from the stock market.

The prevailing trend in stocks and bonds has been for both sides of the market to rally and sell together based on shifts in Fed rate hike expectations.  This makes for the classic mirror image trading pattern we sometimes refer to as the "Fed accommodation trade." 

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Over the past 2 days, however, as the SVB news intensified, markets shifted back to the old school "risk-on/risk-off" trade.

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That doesn't mean this move isn't "real."  To be sure, Fed Funds Futures are reacting as well.  That said, inflation is still the big picture driver of rate momentum.  SVB news only matters in the big picture if it kicks off a mini-wave of bank failures that somehow manage to impact inflation or otherwise serve as a canary in a coal mine for a harder economic landing.  Markets may be braced for that possibility today, but they'll forget all about it if next week's CPI comes in hot.  Conversely, if CPI comes in cooler, it could add to the momentum.  Bottom line: we're still data dependent, but now with a nice little boost to prevailing levels.