Today's NFP has been looking less and less exciting over the past two days as bond markets have put in back to back winning sessions, both of them in surprisingly uneventful fashion.  This could all be part of an elaborate trap to lull bond-bulls (raise your hand if you like low rates) into a false sense of security only for a better-than-expected Jobs report to send yields skyrocketing back toward 2.30 and beyond!

Ok... That last part is almost entirely in jest.  While we're sensitive to the possibility that the last few days of strength go a long way toward helping us forget the recent, vicious, brutal hour that followed FOMC minutes, we don't want to forget it entirely.  Of course, we can see that QE3-related banter has been a big deal for markets, but the March 13th meeting is over and now so is the presentation of its Minutes as of Tuesday this week.

That leaves domestic economic data as a much bigger component of the "stuff" that's moving markets and NFP (the "non-farm-payrolls" component of the Employment Situation Report) is about as big and important as they come in terms of econ data.  It always has potential to move the needle.  But there are a few weird things about today's...

First of all, we don't "get" why there haven't been larger revisions to the consensus estimate for today over the course of the past few weeks (though some have notably hiked predictions, and recently!).  Many of the other places to glean employment-related economic data seem a bit brighter than forecast and a bit brighter than previously reported, but NFP calls continue to add up to 200-210k depending on who you ask?  Hopefully that means that markets won't be overly panicked about an upside surprise.

In that sense, we're thinking (or hoping maybe), that it would take a bigger upside surprise to do significant damage to bond markets and MBS.  Don't ask us to put an exact number on it, but off the cuff, why not say that failing to break last month's 227k feels like it shouldn't add up to "significant damage."  The latter might be defined by a test of 2.29% in 10yr yields or the low-ish 102's in Fannie 3.5 MBS.  

Now the for the other weird thing...  It's a VERY short trading day... just 4 hours from 8am to Noon thanks to Good Friday.  Last we heard, stock markets are closed too and the email out-of-office autoresponders are increasingly showing up in traders' inboxes.  So what's the implication of lighter liquidity and participation?  Well, a lot of that could depend on the instructions left with whoever is manning the office, or failing that, programmed into the black boxes.

While that points to a range trade with recent pivots being informative, we see a lot of technical framework on the WEAKER side of current levels  (2.25, 2.29, 2.33, 2.36 in 10yr yields,  on the upside for instance), but not nearly as much on the STRONGER side, at least not recently (maybe 2.17?  2.13+?  what else?).  That sets the stage for what could happen if things are weaker-than-expected with NFP as opposed to stronger--namely, bonds might deign to explore parts of the range that haven't been seen in a while.  

We imagine such a process could be facilitated by the lighter liquidity and electronic stops hitting some left-over short positions that have thus far eluded getting smacked by bond rallies that have only extended into the highest 2.13's (and there are HUGE pivots at 2.136).  Snowball buying in historically light volume on a 4 hour NFP Friday?!  If NFP is a low-side surprise, don't say we didn't warn you, but pretty much anything else (barring a BIG beat) could be justification to head home early.  Hey!  When else can you work a half-day and punch out after 2 hours?