Treasuries traded in a very narrow range on very light volume today, resting up for what many expect will be a landmark session tomorrow, beginning with the 8:30 a.m. EST release of the February

employment report


The benchmark 30-year bond ended the day down 1/32 at 93 19/32, its yield unchanged at 5.70%. Shorter-maturity (and more actively traded) notes fared a bit worse. The 10-year note, for example, lost 6/32, raising its yield 3 basis points to 5.41%.

The low of the day for the long bond, off 12/32, came shortly after 8:30 a.m. EST, when the weekly count of

initial jobless claims

dropped again, dragging the four-week average down to its lowest level in a decade. Claims totaled 286,000 for the week, dropping the four-week average to 290,750.

There were few other influence on prices, and trading was light. Tracker


saw just $44.0 billion of Treasuries change hands by noon, 16.1% below average for a first-quarter Thursday.

That almost certainly won't be the case tomorrow. Big moves on heavy volume are being predicted, with their direction depending on the size of the

nonfarm payrolls

number in tomorrow's report.

The bears have been in charge of the Treasury market for the last month. As economic report after economic report has shown potentially dangerous strength in the economy, yields on most issues have risen by about 60 basis points. The thinking about the February jobs report is that it could either vanquish the bears, or further embolden them.

"I wouldn't be surprised to see the long bond move two points in either direction," depending on whether the report surprises on the upside or the downside, said Richard Schwartz, vice president and portfolio manager at

New York Life Asset Management

. "The market is pretty oversold, but still kind of nervous. The oversold condition gives it the potential to rally pretty strongly, but nervousness could make it trade significantly lower as well."

The consensus

forecast of economists surveyed by


is for payroll growth of 245,000, the same as the preliminary reading for January. Schwartz said any number in the 200,000 to 275,000 range will be roughly in line with expectations.

There is no agreement, however, about how traders are likely to react to a surprise.

Marcello Frustaci, a trader at

Daiwa Securities

, thinks bonds are likelier to rally than tank. There's so much fear of a number in the 300,000 to 350,000 range, he reasons, that that's what the market has priced in. So even an in-line report has the potential to trigger a big rally.

"Considering the strong data we've been getting -- jobless claims at the lower end of their recent range, most recently -- if anything it's going to be stronger than consensus," he said. "The consensus is 250, but the whisper number everyone is nervous about is 300 to 350. A consensus number will be a relief, because the last two numbers were higher than consensus."

If the number is below consensus, Frustaci said, "We're going to get a super-duper snapback for sure, because it's going to catch the majority of the Street leaning the wrong way."

Rick Santelli, vice president at

Sanwa Futures

, on the other hand, thinks that view underestimates the tenacity of the bears. "I think the number has a much better chance to be above 300 than below it, but even if it's as expected I don't think you're going to see a big sustained rally," he said, adding that open interest in Treasury futures contracts isn't suggesting a surge in short positions to be covered tomorrow.

The prospect of an in-line or weak report "is probably keeping

traders from selling until they see it, but they're still in a sell mode," Santelli said. Far from viewing it as a relief, traders still look at an in-line report as "just another healthy showing" by a key economic indicator. "I think anyone who's thinking we're going to get a sustained bounce is going to be surprised, because bounces are now viewed as opportunities to sell."