Monday marked a solid start to October for MBS as prices held true to the "leveling off" theme rather than the "reversal."  This keeps Fannie 3.0s roughly in the upper middle of their all-time high range from 105-10 to 106-02.  Despite this strong start and general nearness to historic highs, the horizon isn't completely risk-free.

October has been a tricky month for bond markets with the three most recent examples starting out well enough and turning ugly fairly quickly.  Whether or not that becomes the case this time around will likely have most to do with Friday's Jobs report.  To that end there are several reports leading up to Friday which offer some prelude to the official data.

We received the first of those on Monday in the form of the ISM Manufacturing Report's Employment Index.  This is merely a component of a report that focuses on manufacturing but, taken along with other pieces of employment data, combine to offer a preliminary, anecdotal suggestion as to how Friday's big report might turn out.

These pieces of employment factoids (some of them actual, dedicated employment reports, such as ADP's Private Payrolls) will pick back up on Wednesday and Thursday, and therein lies the problem with today: there's nothing on the calendar apart from the standard-issue scheduled Fed "Twist" buying (25-30yrs this time).  It could be noted that there are technically some small points of data, such as weekly chain store sales and the regional ISM data for New York, but it would be a shock to see such things move markets.

The bigger market-moving considerations, frustratingly, are the sort of things that don't adhere to schedules or otherwise remain enigmatic--things like unexpected European headlines and traders positioning considerations ahead of Friday's important data.  That makes it a "watch and react" day for MBS and rate sheets.