Best Levels in Weeks Ahead of High Stakes Jobs Report

Best Levels in Weeks Ahead of High Stakes Jobs Report Rather than circle the wagons and consolidate the recent rally, bonds kicked the buying into higher gear on Tuesday thanks to a surprisingly weak Retail Sales report for December. This can be added to the list of recent data that has urged the bond market to get in position for a similarly weak jobs report tomorrow. Nearly 15bps of improvement in less than a week means that jobs would have to especially downbeat for this pace to continue. If the report surprises to the upside, bonds are at risk of a reasonably brisk correction, but as always, the scope of potential volatility depends on the deviation from the median forecast. Econ Data / Events Employment costsQ4 0.7% vs 0.8% f'cast, 0.8% prev Import prices mm (Dec) 0.1% vs 0.1% f'cast, -- prev Retail Sales (Dec) 0% vs 0.4% f'cast, 0.6% prev Retail Sales Control Group MoM (Dec) -0.1% vs 0.4% f'cast, 0.4% prev Market Movement Recap 09:03 AM Gradually stronger overnight with additional gains after 8:30am data. 10yr down 5bps at 4.157 and MBS up 2 ticks (.06). 11:15 AM Additional gains. MBS up an eighth of a point and 10yr down 7.3bps at 4.135 01:10 PM off the best levels, but still stronger. MBS up 3 ticks (.09) and 10yre down 5.9bps at 4.149 02:55 PM Drifting sideways into the close with MBS up 2 ticks (.06) and 10yr yields down 6.1bps at 4.147