[BRIEFING.COM] Backing Off : Prices are settling down after the early push better was kicked up by the numbers.  The curve saw a run saw a quick blip steeper, but quickly resumed flattening with the 2-10-yr yield spread now 144.4, about where it started the session.

[BRIEFING.COM] Bumping Better : Trade has been boosted since the data with the 6.1% rate being a surprise that was well beyond even the most pessimistic economists' expectations. The actual payrolls number of a mere -84K was essentially an inline yawn, but the inputs overall were bond positive in a growth challenged world. The 10-yr has some room and looks like they'll try to run prices higher and aim to get the yield to the 3.51% level.

[BRIEFING.COM] Night Flights : The market sliced through offers overnight after another round of buying quality took prices to near 5-month highs. Inflation fears have subsided and weak global growth forecasts sent equities into a tailspin. Merrill was downgraded to sell by Goldman but that's probably not too much of a surprise. The jobs report is on deck and much of its thunder has been stolen by this week's rally. The 2-10-yr yield spread is lightly flatter at 144.4 as curve trade has yet to buy into anything. Bond prices in the EuroZone and Japan were bid as stocks crumbled. Today will be all about payrolls. Economists expect anything between -150K to an optimistic -40K with consensus sitting at -75K. Prices are swinging for the fences on a downside miss with the risk of a not-so bad report setting off an unwinding of the week's gains. The dollar has gained more ground on the euro with the regional currency seeing sub-1.42 for the first time since Oct. The yen is near its best levels on the week getting a boost along with geopolitical issues. Gold is getting a boost after an extended beat-down with spot at 798.09 (+1.64) while crude has been offered, now 107.050 (-0.89). All that matters however is payrolls (8:30) and later and Fed's SF Yellen.

[BRIEFING.COM] Table of overnight activity in the financial markets.

Table of overnight activity in the financial markets.

Rally Ho: The session saw a solid run taking the 10-yr up to knock the yield off to tag 3.626% (see 12:03 comment) heading into the big payrolls report Fri. The market got assists from stumbling stocks, a less belligerent ECB, middling data and falling commodity prices while volumes remain suspect. One long time bond slinger was somewhat baffled by the recent run to Mar levels, seeing quality buyers coming from collapsing commodities ("which will see follow-through") but also wondering who knows "what's the next enormous shoe to drop?" (GSE rescue in the offing or to be shot down?) The day's run should see some pre-payrolls profit-taking, but the potential for a really sick number will keep a floor under prices. Regardless of the actual print (and, undoubtedly, multiple revisions) the market will likely see a relief sell-off.  Traders would have to see a biggie, a huge negative to "get any longer bonds."  There is the thought as well that the market is "due for doozey of a number," but by the same token, that sentiment has lowered the bar, so anything shy of -150K would likely end with a bond sell-off.  The curve saw late session unwinds run it back steeper after aiming for the month's flattest levels much of the day, heading out at 144.9 on the 2-10-yr yield spread. The dollar is still chipping away at the euro at the close with 1.4310 propping so far. The not-too bad data helped propel the buck to ytd highs but weak equities hampered it against the yen which is trying to run stops below 106.95. Spot gold is off at 795.25 (-6.05) while crude settled down at 107.89 (-1.46). Tomorrow brings payrolls and SF's Fed pres Yellen.