We weren't expecting the Wholesale Trade report to have much a market impact in light of NFP, but as the only other piece of scheduled economic data this morning, we at least had to give it a chance to wildly miss or beat expectations, potentially accelerating or hindering the bond market rally. But no... 10yr Treasuries and MBS had already been fighting with resistance by the time the 10am data hit. That said, as MBS are currently trying to break into new highs of the day, we can probably at least assume the Wholesale Trade data is not going to hurt as higher inventories and lower sales suggest decreased economic activity in the future. After initially bouncing at 100-15, Fannie Mae 4.0 MBS just moved to 100-16, but there hasn't been a similar "new best level of the day" achievement in 10yr Treasuries. Yields are currently 2.029 after getting into the low 3.02's immediately following NFP. Stocks have fallen into Wednesday's range with the S&P at 1335.55 currently. Overall, bonds seem to be adjusting to their gains fairly well, with minimal choppiness or backtracking. While that's been very good for rate sheets, we need to keep our eyes peeled for profit taking or new short positions bringing prices down faster than the general concern over economic growth can bring them up. So far so good though.

(Reuters) - U.S. wholesale inventories rose more than expected in May, the U.S. Commerce Department said on Friday, creating a potential drag on growth in the second half of the year as the job market slows further. Inventories jumped 1.8 percent in May, well above forecasts for a 0.7 percent gain and following an upwardly revised 1.1 percent rise for April. Wholesale sales, however, fell 0.2 percent. The figures confounded estimates for a 0.2 percent increase, and were dragged lower by an auto sector still reeling from the impact of Japan's major earthquake in March. Automotive sales plunged 10.4 percent, the biggest drop since November 2008, when the world economy was experiencing its worst slump in modern history. Weak employment data published earlier on Friday raised fears about whether consumer demand will be sustained in the second half of the year. (Reporting by Pedro Nicolaci da Costa; Editing by James Dalgleish)

(Reuters) - U.S. short-term interest rate futures traders are betting the Federal Reserve will stay on hold until well into 2012 after a government report showed U.S. companies hired far fewer workers than expected in June. Traders, who had thought the Fed would likely begin raising rates by the central bank's July 2012 meeting, slashed those bets after Friday's report, which showed U.S. employers hired the fewest number of workers in nine months. They now see just a 36 percent chance of a rate hike by the Fed's July 31, 2012 meeting. Before the report they saw a 66 percent chance, based on trading in Fed funds futures at CME Group Inc's Chicago Board of Trade. "It means the soft patch is persisting," said Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi UFJ in New York. Traders are now pricing in the Fed's first rate hike for the fourth quarter of 2012, and see short-term rates at under 1 percent through the first half of 2013.

You'd probably assume that Non-Farm Payrolls at +18k versus a +90k consensus would be positive for the bond market, and you'd be right. This alert is merely to specify that positivity in terms of MBS gains. The immediate reaction to the data sparked a .75 point (24/32nds) improvement in Fannie Mae 4.0's, from 99-18 to 100-10. 10yr Treasury yields fell from 3.18+ to 3.05+. Both MBS and Treasuries have been grinding sideways around those recently reached levels in the 10 minutes following the data. Naturally, this sets us up for the possibility of a better batch of rate sheet offerings this morning, with the obvious caveat that we need to at least some of the gains between now and the time lenders send the morning emails.

Reuters) - U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dampening hopes the economy was on the cusp of regaining momentum after stumbling in recent months. Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations for a 90,000 rise. Many economists raised their forecasts on Thursday after a stronger-than-expected reading on U.S. private hiring from payrolls processor ADP, and they expected gains of anywhere between 125,000 and 175,000. The unemployment rate climbed to 9.2 percent, the highest since December, from 9.1 percent in May. The government revised April and May payrolls to show 44,000 fewer jobs created than previously reported. The report shattered expectations that the economy was starting to accelerate after a soft patch in the first half of the year. The private sector added 57,000, accounting for all the jobs created, with government employment shrinking 39,000 because of fiscal problems at local and state governments. Economic activity in the first six months of the year was dampened by rising commodity prices and supply chain disruptions following Japan's devastating earthquake in March.