Much was made of the potential volatility introduced by yesterday's calendar of events and markets did not disappoint.  But the volatility arrived in an unexpected way for several reasons.  ADP payrolls only beat consensus moderately yet produced the sharpest spike of the day.  GDP accounted for a surprisingly high amount of movement and volume relative to historical performances when in similar company.  Then the FOMC Statement more than undid the damage done by ADP and GDP.  What's up with all this?

It could be the case that the morning events were amplified by the risk that FOMC would be unfriendly and so when it wasn't, there was not only an organic benefit from it's mild friendliness but also an unwinding of that amplification.  In other words, ADP and GDP might not have created such a stir if market participants weren't accounting for the possibility that the FOMC Announcement could add fuel to the fire.  When no fuel was added and with the statement actually coming out more dovish, there was a bit of a scurry to get back in the other direction.  The scurry was potentially amplified by short-covering (those with bets on rates moving higher being forced to buy) and by number 4.

Month-end tradeflows may or may not have added to the positivity.  In any event, there was definitely month-end trading left to be done and volume picked up in the customary 'month-end' sort of way heading into 3pm.  This doesn't necessarily mean that human beings were "deciding" to bet on lower rates into the end of the day, but it raises the question of how much, if any, of the late day rally should be discounted due to month-end buying?

The bigger-than-typical reaction to ADP is very likely confirming just how massively important the employment reports will be between now and September.  GDP's bigger-than-typical response is actually just as much about the remainder of the ADP trade as it is about GDP itself.  This has to do with the timing of the reports with ADP at an unconventional 8:15am vs GDP's exceedingly conventional 8:30am.  In other words, "yeah I want to sell bonds after that ADP report, but I'm gonna wait to sell as much as I'd like until I know GDP isn't going to reverse the trend." 

Today is only really good for catching breath ahead of NFP.  There are a few pieces of data, including Jobless Claims and ISM Manufacturing, but the fact the bigger movement is reserved for Friday.  Further to that point, consider that yields broke higher precisely on the edge of the upper trendline in the chart below.  That was the 'consolidative range' leading up to this Wednesday-Friday time-frame--thought to motivate a breakout.  Given that we subsequently ended the day right back inside that range, the  eventual breakout could be even more violent, but ESPECIALLY if today's data manages to keep yields contained in the same range.