Much like yesterday, today's economic data was far enough from consensus to move markets.  Unlike yesterday, the movement was in an unfriendly direction after Housing Starts came in at the best levels since late 2007.  There were weaker aspects to the report (like a big slide in Building Permits), but those were mostly chalked up to volatility in multi-family construction, thus having less of an impact.

In both cases (today and yesterday), a major caveat is in order.  Namely, volume and liquidity remain light.  Markets are either waiting for tomorrow's FOMC Minutes, or they're just generally tuned out as the summer vacation window closes.   In the meantime, lighter volume/liquidity means it takes fewer trades to move trading levels.  Simply put, bond markets look like they care more than they otherwise would.  Even then, today's range has been well-within the recent range--another vote for pre-FOMC consolidation.

Despite the initial weakness, bonds found support at the 9:30am NYSE open.  This looks like it's mostly a factor of late European trading where sellers were flushed out in the run up to 9:30am.  Since then, we've been gradually improving with MBS just now making it back to 'unchanged' on the day.