The bond market took a break from the past 3 days of weakness today. There weren’t any significant economic reports or news events (not as far as the market was concerned anyway), including any material changes to the coronavirus outlook.
This offered a good opportunity to reflect on the nature of the coronavirus response. Simply put, traders were never expecting a dire fate for the human race as a new disease Thanos-snaps half global population. Rather, they were pricing in a very logical adjustment to global economic output based on the decreased commerce that’s already been well-established. In addition to that adjustment, there’s likely some measure of additional caution built into bond trading levels, and it’s that caution (i.e. those drops in yields) that are most susceptible to quick reversal as the coronavirus outlook improves.
For everything else, there’s economic data! Because, again, even the coronavirus trade is mostly a function of economic expectations. With that in mind, tomorrow’s NFP doesn’t really fit in the current paradigm for a few reasons. It is based on data collected well before the coronavirus panic began. It focuses on employment in the US (not the first place we’d see coronavirus impacts). And the US labor market isn’t particularly a hot button anyway (not at the moment, at least).
Nonetheless, the established track record of the jobs report is such that we still have to give it due respect as a potential market mover–especially on a day where the bond market just leveled off near an important inflection point.