MBS MID-DAY: 3/20/2012

As we've seen several times in recent sessions, bond markets turned weaker shortly after 9am. The stock-lever has been doing a better job of staying connected in March, particularly during the bigger moves.

Treasuries are somewhat tentative at the moment as stocks are opening in negative territory but have not yet fallen past overnight lows in S&P futures. 10yr yields have a supportive pivot so far this morning at 2.365. The analogous version for MBS is at 101-26 in Fannie 3.5's. Our first goal is to hold one or both of those, and if successful, assess upside potential from there.

The only other notable calendar item this morning is scheduled Fed Twist buying in the long end from1015am-1100am. Bernanke himself speaks at 1245pm.

The markets' strings remain at the mercy of the "unseen hand" as tradeflows convincingly trump fundamentals. That leaves us resigned to watch and react as opposed to trying to "get ahead of the market." Attempts to do otherwise are risky at best, if not outright foolish.

Fannie 3.5's are currently up 9 ticks at 102-01 and 10yr yields are down 3 .6bps on the day at 2.34. S&P futures are pushing lower at the moment, down 12 points from 5pm, helping bond markets bounce back from their pre-stock-market-open concessionary selling.

* Starts -1.1 pct vs Jan +3.7 pct
* Annual rate of 698k vs consensus 700k
*permits +5.1 pct vs +1.6 pct Jan
* permits 717k annual rate vs 690k consensus
* single family starts -9.9 pct, multi-fam +21.1 pct
* permits highest since 10/2008
* Note wide margins of error in some of the statistics below

The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for February 2012:

Building permits in February were at a seasonally adjusted annual rate of 717,000. This is 5.1 percent (±1.2%) above the revised January rate of 682,000 and is 34.3 percent (±3.1%) above the February 2011 estimate of 534,000. Single-family authorizations in February were at a rate of 472,000; this is 4.9 percent (±1.2%) above the revised January figure of 450,000. Authorizations of units in buildings with five units or more were at a rate of 219,000 in February.

Housing starts in February were at a seasonally adjusted annual rate of 698,000. This is 1.1 percent (±15.9%)* below the revised January estimate of 706,000, but is 34.7 percent (±16.7%) above the February 2011 rate of 518,000. Single-family housing starts in February were at a rate of 457,000; this is 9.9 percent (±11.4%)* below the revised January figure of 507,000. The February rate for units in buildings with five units or more was 233,000.

Housing completions in February were at a seasonally adjusted annual rate of 568,000. This is 6.2 percent (±15.8%)* above the revised January estimate of 535,000, but is 7.0 percent (±14.1%)* below the February 2011 rate of 611,000. Single-family housing completions in February were at a rate of 421,000; this is 8.2 percent (±18.9%)* above the revised January rate of 389,000. The February rate for units in buildings with five units or more was 144,000.