Whither MBS go increasingly depends on whether data withers from winter weather.  I'm so sorry about that sentence.  In more modern words, the more the harsher-than-normal winter is used as a scapegoat for bad economic data, the less that economic data will matter.

Today's New Residential Construction (Housing Starts, Permits) report is a good example.  This data has been somewhat spotty with respect to its market-moving capabilities, even before the weather issue emerged as an acceptable reason to dismiss weak economic data.  The fact that yesterday's weak data didn't slow down a stock rally and only moderately added to bond market strength (it was more about technicals and the tradeflow environment) suggests the weather excuse is holding water with market participants. 

Housing Starts would be hard-pressed to fall off as sharply as NAHB did yesterday, though keep in mind that NAHB was February data whereas today's Housing data is for January.

The conclusion--if there is a relevant one to be made--is that the reaction to today's housing data will be 'interesting' if there is any reaction.  If the data is much weaker, and stocks continue to rally while bonds barely budge, we'd have further confirmation that the weather is postponing honest reflection.

At least there's FOMC Minutes right?  That's always potentially relevant.  Well... except for today, because of course, there's that whole "weather thing."  After all, if markets can trade as if the weak data isn't really happening, how can the Fed adjust policy based on weakness that might actually turn out to be even 50% weather-related?  Granted, this is a meeting that took place more than 3 weeks ago, but even if we disregard any of this weather business, that FOMC Announcement was still a non-event.  There's not much doubt about how the Fed feels and markets have the clear impression that they're serious about tapering. 

The scary thing about all this is that markets are sincerely out of luck when it comes to obvious market movers.  Hence, "stuff" like technical levels and tradeflows surrounding corporate bond market hedging had an outsized effect in yesterday's session.  That leaves us in the frustrating "wait and see" mode, or "watch and react" if you prefer.