MBS Pricing Snapshot

- Index stands at 44 vs 47 consensus, lowest since Oct
- Singe-fam sales index falls to 47 from 51
- Prospective buyers index rises to 35 from 32
- 6 month outlook rises to 51 from 50

Builder confidence in the market for newly built, single-family homes paused for a third consecutive month in March, with a two-point reduction to 44 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Following eight consecutive months of improvement, builder confidence leveled off in January and has since edged down several points,” noted NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals.”

There are a lot of Cyprus headlines out there yesterday and today. Here's the gist: the EU said Cyprus can have the bailout they need if their banks cough up 7-10% of private deposits (yes, like a good old fashioned bank levy). That would be like the US saying that we would prevent the fiscal cliff by taking cash out of everyone's bank accounts, announce it on a weekend, and freeze access to large withdrawals to prevent runs on ATM machines (there were still runs on ATM machines in Cyprus).

As you can imagine, this isn't a popular idea, and it's a questionable decision on the part of the EU as it creates what could turn out to be a no-win situation where failure to execute (Cyprus gets to vote on whether or not they agree to this wonky condition) creates the probability of default and success could actually be worse (in that it sets a precedent for other at-risk countries to fear for the certainty of private citizens' bank deposits).

Asian markets took the headlines and ran with them--full tilt--driving 10yr yields down to 1.89+ in defensive preparation for the European open. Initial trading in Europe took things back in the other direction, but only so far. 10yr yields were able to hold on to their 1.95 technical pivot both at 5am and now again at 9am. 10's are currently 4.9bps better than Friday afternoon at 1.9425. Fannie 3.0s opened at 102-31+ and are back at those levels after moving a few ticks lower.

There's no meaningful economic data on tap today, so the focus is very much on European markets and their ongoing reaction to all the drama. The US equities open is another potential source of guidance coming up in just a few minutes. Whatever the case, so far so good for domestic bond prices, though at the expense of global economic stability. From a technical standpoint, holding under 1.95 would be a strong showing from Treasuries to start the week.