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This is the bond market!

10yr

Is this what they mean by “volatility”?

U.S. stocks gyrated wildly Friday morning, pushed and pulled by the both the monthly jobs report, as well as the headlines breaking from the G-2o meeting where President Obama and President Putin both are making statements about Syria. The Dow, which openly modestly higher, plunged on the heels of the Putin headlines, falling nearly 150 points after the Russian leader pledged support for Syria should the U.S. decide to launch an attack. It soon after recovered, however, and recently is back in the green.

As wild as that move was, it was nothing compared to the move in the Treasury market right after the jobs report hit. The yield on the U.S. Treasury 10-year note was at 2.96% before the report hit the Tape at 8:30 a.m. Eastern time. It immediately plunged to 2.84% – so fast it may have seemed like a mistake.

With the 10-year yield creeping up to 3% — it briefly touched that level Thursday afternoon — it seems most traders were betting on higher yields are were really caught off-guard by the jobs report and its implications for Fed policy and bond yields.

If short-covering accelerates, it could push the 10-year yield under 2.8%, bond trader Jason Rogan at Guggenheim Securities said. “Until yesterday, most people thought the Fed would taper bond-buying this month,” he said. “Now this is not a done deal.”

The move may say more about traders’ positions than it does about what the Fed ultimately does.

“Our best guess,” Capital Economics’ Paul Ashworth wrote, “is that the cumulative evidence of improvement over the past year will convince a majority of officials that the tapering should begin at the next FOMC meeting in another couple of weeks’ time, but we are not going to pretend that this is a certainty.”

This jobs report may or may not alter the Fed’s thinking. But at the least, the weak nature of this report means the “what will the Fed do” guessing game in the market will have some real teeth to it the next couple of weeks. As UBS’s Art Cashin is fond of saying, stay nimble.

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