*NAHB Index 28 vs 30 consensus
*Last month revised from 29 to 28
*Prospective buyer index unchanged
*6 month outlook up from 34 to 36

Builder confidence in the market for newly built, single-family homes was unchanged in March from a revised level of 28 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This means that following five consecutive months of gains, the HMI is now holding at its highest level since June of 2007.

“While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Florida. “This is demonstrated by the fact that the HMI component measuring builder expectations continued climbing for a sixth straight month in March, to its highest level in more than four years.”

“Builder confidence is now twice as strong as it was six months ago, and the West was the only region to experience a decline this month following an unusual spike in February,” observed NAHB Chief Economist David Crowe. “That said, many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets.”

A small dose of tragic irony just now.... Moments after Fed's Dudley--arguably one of the most important voters on the committee--said that the "financial world has moved from the more genteel business of investment banking to the less genteel business of trading," markets proved him right. Treasuries moved quickly higher and MBS quickly lower, taking both into negative territory on the day.

The irony is that the moves aren't connected to the Dudley comments, nor are they connected to any of the "more genteel" investment banking considerations from Dudley's imagery (we say imagery because the words conjured up mental images of tweed vested, monocled old chaps watching the ticker tape and trading the fundamentals).

We can tell you that the movement is NOT connected to certain things, but neither do we know what it IS most properly connected to. Stock market cash open perhaps? Pre-Fed-Buyback positioning? Combination of the two? Either way, it proves Dudley's point in that tradeflows trump fundamentals, and that is indeed "less genteel" as far as market watchers are concerned.

The move has taken 10yr yields up to 2.31 and Fannie 3.5 MBS into negative territory on the day at 102-13.

Asian market hours were uneventful for bond markets as the 2.30% 10yr yields seen heading out on Friday were almost exclusively unchanged and unchallenged. Without any provocation from data or events, Treasury yields and stock prices began falling at the European open in relatively light volume. Shortly after 4am New York time, 10yr yields hit their best levels since Thursday at 2.265, and have bounced there several times this morning.

Although the other side of the morning's range had been mostly supported by a ceiling at 2.28, things have weakened somewhat since 9am. 10yr yields have returned to essentially break-even levels with Friday's close in the mid 2.29's and Fannie 3.5 MBS are 4 ticks better than Friday's close, currently 102-17 after having been as much as 5 ticks stronger earlier this morning.

At this point, we may be seeing some supportive gestures from Friday's closing levels, and would be hoping for more as the morning progresses. None of the morning's data or Fed-speak has had an impact, and it's questionable whether the remaining report--NAHB Housing Market Index at 10am--will be any different. After that, however, the scheduled Fed buying in the 8-10 yr sector will commence until 11am which should see the days biggest volume and hopefully reinforce the supportive levels seen so far in today's range.