Generally quiet in early activity this morning in the bond and mortgage markets; trade in the stock index futures at 9:00 pointing to a better open at 9:30. In Europe stock markets are weaker, continuing to decline on the renewed debt crisis that surfaced in tiny Cyprus. In an effort to get financial assistance frm the ECB and IMF the country announced it would simply take money frm bank deposits; the plan endorsed by the ECB and IMF. The original idea was to take 6.75% of customers' accounts under 100,000 euros and 10% of deposits that are over 100K euros (much of it money frm Russian depositors). After protests raged against the "theft" the country's parliament delayed the vote, considering taking less, if anything, from savers that have less than 100K euros. Banks in Cyprus remain closed until Thursday. According to estimates, if the government actually does raid accounts the amount is about 5.8B euros ($7.5B). EU finance ministers appear to be back-tracking on the demand to raid small accounts under 100K euros. Feb housing starts and permits, the only data today; starts were up 0.8% to 917K annualized units, less than expected but offset by increased starts in January from what was initially reported. Jan starts originally recorded down 8.0% were revised to -7.3%, in terms of units the revision totaled 910K frm 890K originally reported. Taken together the two months are in line with forecasts and continue to confirm the sector is improving.

Feb building permits were stronger than estimates at +4.5% to 946K units, units were expected at 925K. Stock indexes gained a little more on the data.

The bellwether 10 yr note is at its 40 day average, so far unable to break below it. 30 yr MBS price also at a critical technical level, its price unable to move above its 20 day average. At 9:30 the stock market opened better; the DJIA +38, NASDAQ +10, S&P +4; the 10 yr note at 9:30 1.94% down 1 bp and 30 yr MBS price +6 bps.

Today the FOMC meeting gets underway; there won't be any news though until tomorrow afternoon at 2:00 with the policy statement, then at 2:30 Ben Bernanke will hold his press conference. Expect questions from reporters to range frm the renewed debt concerns in the EU to details on the economy and plans to exit QEs. The Fed is not about to exit the $85B of monthly purchases of treasuries and MBSs until at least the end of the year---if then. While the US economy is improving, the resurrection of the EUs problems will keep the Fed and other central banks accommodative.

With little additional news from the EU, and tomorrow's FOMC policy statement and Bernanke's press conference, today is likely to quiet with little changes in the bond and mortgage markets. The stock indexes have started better this morning however we do not expect any major changes. In the near term the bond and mortgage markets are looking slightly better; most of the strength however is based on minor moves to safety in US and German bond markets over the uncertainty about Cyprus contagion. Standing on its own Cyprus is a hiccup in the wider perspective; the fear is that if the country actually does take depositors money, other EU countries may also try it. That isn't very likely, but the concern over it has pushed some money into safety of US notes and German bunds.