Rumors of upward revisions to back-payrolls data in Friday's release were recycled and churned the Treasury market on the eve of the key release. The rumor may have stemmed from the likelihood that the Bureau of Labor Statistics will issue a statement Friday regarding the size of the benchmark revision that is expected for the March reference month, based on preliminary tabulations from the unemployment insurance data. This update will only help analysts evaluate the accuracy of the payroll survey over the last couple of years (there will be no benchmark revisions, which come out early next year).
Rumors last week also circulated that the estimated adjustment could be upwards of 600,000, and its latest manifestation knocked bunds and bonds down a peg before trading even started stateside. The rumors eclipsed the 13,000 jump in jobless claims to 399,000, a gain that was payback for Hurricane Isabel hindering filers in the prior week anyway.
Additional rumors: an explosion in the Chicago area, and Fedspeak, subsequently helped Treasuries halve their losses by the close. Fed's Moskow and Santomero both said labor would continue to lag, while Bernanke downplayed outright deflation risks and said that employment remains a "major concern" for the Fed. Short-covering was led in the 2-year sector, which gave curve steepeners another leg up, as one shop was heard unwinding a stale short position in that maturity.
The December bond closed down 24/32 at 111-10, while the 2-year note and 30-year bond spread gained 3 basis points to +347 basis points.