From the moment yields began drifting higher following the mid-October rally, absolutely nothing new has happened for bond markets.  Trading levels have gotten progressively more negative in frustratingly non-threatening baby steps.  The frustration sets in when you see those baby steps added up to a full-grown sell-off of 40bps in 10yr yields, or about a quarter of a point in terms of mortgage rates.

What are markets thinking right now?  Was the mid-October run a sign of things to come; a warning shot to those betting on gradually higher yields?  Or was it an anomaly that provided an unequivocal opportunity for bond markets to "call the bottom" for the foreseeable future?  There are smart people out there on both sides of this debate, but I think a better case can be made for the bullish crowd at the moment.

Reasons for this include:

1. The fact that we can assume a bit of extra weakness is currently in play from a colossal few weeks of corporate bond offerings.  This very likely leaves some buying to be done after those corporate hedges are unwound (corporations sell Treasuries to "lock their rate" but eventually buy them back).

2. The fact that we can assume a bit of extra weakness due to the upcoming quarterly refunding.

3. Elections and earnings have both been bullish for stocks and bearish for bonds, yet bonds haven't kept pace with the stock rally (meaning Treasury yields would have risen faster if they were following stocks in lock step). 

4. Europe is still Europe.  It's not fixed, and until it is, or at least "seemingly on the way," there will continue to be interdependent global growth concerns.  That will continue to weigh on US interest rates.

5. Japanese QE expansion for two reasons.  A) Japan will buy more US debt.  B)Japan will also buy more stocks and, to some extent, increase speculation that they may gain some traction.  The latter would be bad for bonds fundamentally, and also structurally due to weaker yen.  But Treasuries held up fairly well on the day of that seemingly big announcement--once again doing better than it seemed like they should given what related markets are doing.

6. Regarding today's Jobs Report, whisper numbers are said to be in the 300k neighborhood.  Even if they weren't, strong labor metrics are no longer a surprise.  +200k NFP's are the norm these days, and it's clear that payrolls, unemployment, or any other labor metric no longer has the power to scare bond markets like they used to.

7. The ECB...  After being called out on infighting at the press conference yesterday, Draghi's evasion of the question went a long way toward confirming the divisions within the central bank.  Markets clearly have some doubt that the ECB will be able to fire the bazookas needed to turn Europe around--not quickly anyway, or German Bunds wouldn't be well under 1 percent.

8. Technicals are ripe for a correction.  While ripeness doesn't guarantee the fruit will fall from the tree, it's promising considering the amount of shaking going on with these other factors.

With all those reasons for bullishness in mind, please understand that we can always go either way after NFP.  If we happen to be on the run, keep an eye on bond markets' level of grace under pressure.  Bouncing at key levels like 2.44 or 2.47 in the event of a big sell-off could be an early indication that positivity will gradually kick in.  On the other side of the coin, if NFP tanks and bonds rally, it would be extremely disheartening not to see a solid move below 2.34.