It's an exciting and dangerous time for US rates markets, full of risk and opportunity.  For those of us who were closely watching trends in rates at the end of 2013, the last 14 months have been unexpectedly excellent.  Much of the excellence had to do with the gradual pricing-in of ECB QE.  Supporting players included Greek drama, a rallying dollar, positional imbalances (many traders kept betting on rates going higher, resulting in "pain trades" as those positions were flushed out), global growth concerns and stagnant wages domestically. 

Now as we enter March (a more volatile month than February, historically), we find ourselves with most of those factors on different footing.  ECB QE is now a reality and markets must now assess how well they've priced it in.  Paradoxically, rates face greater upward pressure after something like QE actually starts, largely because of the way markets aggressively "buy the rumor" of major events, only to "sell the news."  Greek drama is mostly on hold for several months, and at the very least until the end of March.  Trading positions are more balanced, European data is showing signs that it may be finding some sort of lower bound, and the same goes for domestic wages.

On this topic of data and wages, even if the bigger-picture bounces prove to be temporary, they could certainly make things challenging for rates in the meantime.  The more it looks like global growth concerns are ebbing and  like the US economy is improving where it counts, the easier it will be for rates to rise.

That makes this week critically important as it brings the first look at average hourly earnings since last month's came in with the highest month-over-month gain since late 2008.  Long story short, last month's NFP data was super strong.  If this month's confirms that--especially if wage growth remains strong--it will raise immediate concerns regarding "too much" Fed accommodation. 

But before you read too much gloom into these observations, keep in mind that we're far from considering a break of the longer term trend just yet.  In fact, the only threat to the longer term trend recently was when January's strength made for a break toward rates that were TOO LOW to fall within that trend.  In that light, February could be viewed as a correction that brings us back in line with that trend.