As expected, weak NFPR

Well as we guessed the Non-Farm did indeed come in lower with the headline figure dropping 80k. This caused a rally across the curve in fixed income. I did however find the action on Friday a bit confusing for two reasons. Both the US and European bond markets retraced pretty much all their gains post payrolls and on some very good size. The Bund getting within 5 ticks of its pre-non farm rally. What was particularly odd was that it was very difficult to identify when this presumably NFPR profit taking was going to finish. When it did the turn around, it wasn't all that clear to me and the resulting rally took out the previous high, largely due to the rally in the UST's. Again the cue seemed to be purely off the back of the stock market. However, I do note that for a non farm friday the Bund volume was light at some 800k ish lots. Which leads me to my second source of confusion and that is how the equities seem to have disregarded non-farm. However I would have to say that I don't think the daily Dow chart looks at all constructive. Three spinning tops with what looks like a good swing higher forming on the daily bond charts makes me think that stocks are going to be under pressure early this week.
On the calendar to look forward to we have very little in the way of decent data. 11:00 tomorrow provides Feb industrial production for Germany, and given the strong ifo, I wouldn't be surprised if this came in better than expected. This week is really going to come down to Thursdays ECB press conference to see if the uptick in inflation and the public sector pay deals have the ECB hawks on full alert and willing to up their rhetoric. The beginning of the week will be about the stocks and risk aversion keeping the bid into the fixed income markets.
On Friday at 16:00 the yields were Euro(2,5,10) 3.48, 3.66, 3.94 and US (2,5,10) 1.85, 2.64, 3.49. The euro stood at 1.5738 and at 0.7893 against Stg. The curves continuing their flattening bias, as the US / Euro curve widened reflecting the poor figure on Friday.

The needle of the compass

The ECB only has one needle in its compass. ' The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term. '

Well the flash estimate for CPI just came out at 3.5%, the euro had firmed up some more against the majors. Spanish CPI came out this morning at 4.6% yoy. Fixed income didn't really bat an eye lid. Bund volume is light at 225k lots. It would appear that the needle of the compass is not doing its job. Perhaps the medium term history will prove to judge otherwise.