Nonfarm payrolls came in at 227k vs a median forecast of 175k.  This fact, in and of itself, would almost always be grounds for bond market weakness, but that wasn't the case today.  Mitigating factors abound:

1. The 175k forecast was obviously a bit light considering it didn't change in response to Wednesday's balmy ADP employment data and the strong ISM Manufacturing employment index.  In other words, markets were probably prepared for 200k+

2. There was no significant revision to last month's reading of 156k (revised to 157k), which is on the lighter side of the recent range.

3. Unemployment ticked higher (up to 4.8 vs 4.7).  While traders don't tend to care about unemployment nearly as much as local evening news anchors, it helped offset the headline nonetheless.

4. The biggest mitigating factor was the wage numbers, which came in at +0.1 vs a median forecast of +0.3.  Moreover, the previous month was revised down to +0.2 from +0.4.  That sort of wage momentum isn't conducive to inflation growth, which in turn isn't conducive to the Fed hiking.

With all of the above in mind, bonds rallied throughout the morning.  European markets helped--a fact that became more apparent when Treasuries began struggling as Europe closed.  

The biggest issue in the afternoon was a series of comments from San Francisco Fed President Williams regarding rate hike timing and the Fed's reinvestment strategy.  Williams said that March was a live meeting.  That wasn't too much of a surprise, but he reinforced that stance with comments on inflation pressure being "in a good place" before topping it all off by offering a specific example of how the Fed might decide when to curtail its portfolio reinvestments.

That last part is a hot topic lately, as several Fed speakers have mentioned it now, and in similar ways.  It's not something that would happen soon or abruptly, but it is a reality that bond traders would like to adjust for (if it looks like it's coming).  That adjustment took the form of a fairly brisk sell-off that unwound all of the morning's gains.  Bonds bounced a bit heading into the close, leaving Treasuries mostly unchanged and MBS less than an eighth of a point higher on the day.