J.P.Morgan Outline The Broader Market Themes Into NFPs

J.P.Morgan note that "with a standard deviation of 200K in forecasts around tomorrow's consensus, a NFP reading at the extreme end of the range could be a catalyst to dislodge the Treasury market from the narrow range it has held for the last number of weeks. Indeed, range volatility in Treasury yields has declined to levels since just prior to the outcome of the Georgia Senate runoff elections in early January. However, current yield levels appear fairly valued after adjusting for the Fed's forward guidance, growth expectations, and medium-term inflation expectations, among other factors. Thus with valuations relatively fair, even with yields at the low end of the recent range, risks are likely symmetric around an outsized surprise tomorrow. Position technicals bear watching as well: while most of the indicators we watch are relatively neutral, our Treasury Client Survey shortened further this week, indicating a breadth of bearish duration positions. Given this backdrop, we continue to favor more carry-friendly bearish positions instead of outright duration shorts and continue to recommend 3s/7s steepeners."