Wow! Holy Moly Batman! This morning's Feb employment report blew the doors off all the forecasts; it is after all the employment report that is most always a shock of some kind. The unemployment rate in Feb declined to 7.7% frm 7.9% in Jan and down 0.1% more than thought. Non-farm jobs increased 236K, consensus was 171K; non-farm private jobs increased 246K, consensus +195K. Non-farm jobs now at the highest since last Nov and the unemployment rate the lowest since Dec 2008. Employment reports don't usually come close to forecasts, thus we normally have a lot of volatility when the data is reported. The revisions to previous reports; Dec revised up 23K, Jan revised lower by 38K.

Today's report showed factories added 14,000 workers in February, compared with a projected 9,000 advance and following a 12,000 increase in the previous month. Auto manufacturing, reflecting car and truck sales, running close to the best pace in five years. Employment at private service-providers jumped 179,000 last month. Construction companies added 48,000 workers, reflecting a 17,100 gain in payrolls at residential trade contractors. Retailers took on 23,700 employees.

At 9:00 this morning the 10 yr note yield climbed to 2.08%, the highest rate in over a year, and finally takes the bullish bias away from those still holding that rates would decline. 30 yr MBSs at 9:00 -39 bp frm yesterday's close. The strong employment report also brings the Fed back into focus in terms of ending its QE sooner than what was thought just 24 hours ago. One more month of strong employment data in March will likely cause the Fed to begin planning in earnest its gradual reduction of monthly Fed purchases of MBSs and treasuries.

The report sent Europe's stock market higher and the US key indexes up; at 9:00 the DJIA futures were up 100 points frm yesterday's close; the S&P traded just shy of its all-time high. At 9:30 the DJIA opened +68, NASDAQ +15, S$P +7; 10 yr note 2.07% +7 bp and 30 yr MBSs -19 bp frm yesterday's close.

By 10:00 markets haven't changed much from early trading; stock indexes actually lower than at the open. The 10 yr note at 2.06% down frm 2.08% on the initial reaction to employment data. This week has not been good for the interest rate markets, either fundamentally or technically. The bond and mortgage markets are in new low territory on prices and new highs for yields on the recent move higher in rates. Hard to find anything good this week unless one looks at their 401K, stock indexes continue to climb. The DJIA making new highs everyday while the broader market, the S&P 500 still not yet in new high territory, 1565 is the current all-time high, trading at 1546. There is a strong possibility markets will reverse their direction by the end of the day; however it would not change the bearish momentum in the interest rate markets in the wider perspective. Since the open key indexes have lost ground and rate markets are off their worst levels.