"NFP doesn't matter."  These are bold words at times, a no-brainer at others, and a lucky guess most of the time.  While NFP matters greatly in general and has, on average, been far and away the most important market mover in terms of US economic data, there are occasions where it's clearly overshadowed by other considerations.  Now is one of those times.

First and foremost, we need to understand what's causing the breakout in yields seen in the following chart:

If you didn't catch the MBS Huddle video yesterday (MBS Live members make sure you're receiving Huddle notifications HERE), the following chart shows how US bonds have been dragged higher by European bond markets since Mario Draghi's June 27th tapering cues.

In other words, the US bond market is getting most of its inspiration from a panicked EU taper tantrum trade.  Domestic affairs still matter, to be sure, but the Fed has been more and more candid about placing the focus squarely on inflation when it comes to US monetary policy.  Nonfarm payrolls--while a big report--doesn't speak much to inflation.  Therefore, it's not likely to bring about lasting change in bond markets.

But take note!  A big beat or miss in NFP will still almost always have short-term effects.  This comes with the territory of being the biggest economic report of them all.  Traders (and algorithms) are conditioned to react to big swings in the actual result versus forecasts.  If that result takes bonds in one direction or another, it would need to be confirmed next week by subsequent developments in the EU.  Otherwise, it's just noise against a more complicated, bigger-picture backdrop.