Short End Gains after Weak Jobs Report

But a stock market rebound wiped out the rally for the long end

Treasuries had the potential to gain at lot from the 223,000 plunge in April payrolls Friday, but justice was perverted by an optimistic rebound in stocks on hopes of more preventative medicine from the Fed. Only the bond, however, did not participate in the euphoria of another bad economic number, with the rest of the curve outperforming. The powerful steepener put back on lifted the 2s/30s spread to +153 basis point from the +145 basis point area. The June bond knee-jerked nearly a point higher initially with an added jolt of the rate of unemployment jumping to 4.5%. Then it managed it to sag 2/32 in the red at 102-11 after doubling back well ahead of the key 50% retrace and 50-day moving average around 103-19/25.

A large seller of December Euro dollars (25,000) emerged after buying Junes the past couple sessions, but this was absorbed after spurious rumors, which were denied, of a Fed intermeeting cut and amid talk that the BLS would imminently revise payrolls. Fed funds futures priced 50 basis points cut back in for May-15, and Fedspeak today (Broaddus, Moskow and Kelley) warned of low economic visibility near-term. The dollar plunged, then clawed back.