As widely thought, the Greek parliament passed the austerity plan that the creditors were demanding. EU finance ministers approved a €7B ($7.6B) bridge loan to the country opening the path to a third bailout. The deal is expected to be officially announced tomorrow after other parliaments vote on the plan. The money will be used to make a €3.5B payment to the ECB on Monday; the money coming frm the ESM (European Stability Mechanism). Greek banks will get aid to re-open the banks. The EU is still working on safeguards to shield non-euro nations from Greek bailout risk. For the bridge loan to proceed, it needs approval from all 28 EU nations. Finance ministry deputies are planning to hold another conference call today with the intention of signing off on a deal by tomorrow. Safeguards for non-euro area nations will be needed to win support from the U.K., Denmark and others who’ve said they won’t approve an EFSM loan if their taxpayers are at risk. The German finance minister, still believing Greece should take a time out from the euro. His view that a temporary exit from the 19-nation euro region may be “the better way” since it would allow the debt forgiveness that is necessary yet banned under euro rules.
Finance Minister Euclid Tsakalotos said during the debate, “I don’t know if we did the right thing. But I know we did something to which there was no alternative.” “Nobody knows at the moment how this is supposed to work without a haircut and everybody knows that a haircut is incompatible with euro membership”. Look for a shake up now within the Greek government.
The global equity markets improving today on the Greek vote. The US markets have not shown much change after the vote yesterday; it was widely expected. The DJIA yesterday was about unchanged, this morning the index opened +68, NASDAQ +34, S&P +11. The 10 yr and MBS markets also rather calm this morning; the 10 at 9:30 2.39% +3 bps, 30 yr MBS price down just 13 bps frm yesterday’s close and +11 bp frm 9:30 yesterday.
Weekly claims this morning were right on estimates, -15K to 281K after increasing 16K the prior week.
Janet Yellen back to Congress, today at the Senate Banking Committee. She took heat yesterday frm the House committee on Fed policy, where rates are headed and the lack of congressional involvement in Fed actions and data. Likely she will be treated a little more civilly by senators but will grilled again.
Two data points at 10:00; July Philadelphia Fed business index, expected at 12.0 frm 15.2 in June, the report was soft, at 5.7. The July NAHB housing price index increased to 60 frm a revised 60 read in June (frm 59). The index is the highest since Nov 2005. The component gauging current sales conditions rose one point to 66 and the index charting sales expectations in the next six months increased two points to 71. Meanwhile, the component measuring buyer traffic dropped a single point to 43.
With the exception of four days since the beginning of June the bellwether 10 yr note yield has traded between 2.48% and 2.30%; a wide range but still holding mortgage rates in a narrow range with no significant increases. Our work remains bearish but not overly so. The longer outlook consensus is still bearish with the Fed expected to start normalizing rates at the Sept meeting.
PRICES @ 10:15 AM
10 yr note: -5/32 (15 bp) 2.37% +1 bp
5 yr note: -6/32 (18 bp) 1.67% +3 bp
2 Yr note: -3/32 (9 bp) 0.67% +3 bp
30 yr bond: +2/32 (6 bp) 3.14% unch
Libor Rates: 1 mo 0.186%; 3 mo 288%; 6 mo 0.461%; 1 yr 0.772%
30 yr FNMA 3.5 Aug: @9:30 102.73 -13 bp (+11 bp frm 9:30 yesterday)
15 yr FNMA 3.0: @9:30 103.26 -10 bp (-4 bp frm 9:30 yesterday)
30 yr GNMA 3.5: @9:30 103.70 -9 bp (+12 bp frm 9:30 yesterday)
Dollar/Yen: 124.02 +0.26 yen
Dollar/Euro: $1.0888 -$0.0062
Gold: $1143.50 -$3.90
Crude Oil: $51.82 +$0.41
DJIA: 18,068.27 +18.10
NASDAQ: 5136.79 +37.85
S&P 500: 2118.22 +10.82
Finance Minister Euclid Tsakalotos said during the debate, “I don’t know if we did the right thing. But I know we did something to which there was no alternative.” “Nobody knows at the moment how this is supposed to work without a haircut and everybody knows that a haircut is incompatible with euro membership”. Look for a shake up now within the Greek government.
The global equity markets improving today on the Greek vote. The US markets have not shown much change after the vote yesterday; it was widely expected. The DJIA yesterday was about unchanged, this morning the index opened +68, NASDAQ +34, S&P +11. The 10 yr and MBS markets also rather calm this morning; the 10 at 9:30 2.39% +3 bps, 30 yr MBS price down just 13 bps frm yesterday’s close and +11 bp frm 9:30 yesterday.
Weekly claims this morning were right on estimates, -15K to 281K after increasing 16K the prior week.
Janet Yellen back to Congress, today at the Senate Banking Committee. She took heat yesterday frm the House committee on Fed policy, where rates are headed and the lack of congressional involvement in Fed actions and data. Likely she will be treated a little more civilly by senators but will grilled again.
Two data points at 10:00; July Philadelphia Fed business index, expected at 12.0 frm 15.2 in June, the report was soft, at 5.7. The July NAHB housing price index increased to 60 frm a revised 60 read in June (frm 59). The index is the highest since Nov 2005. The component gauging current sales conditions rose one point to 66 and the index charting sales expectations in the next six months increased two points to 71. Meanwhile, the component measuring buyer traffic dropped a single point to 43.
With the exception of four days since the beginning of June the bellwether 10 yr note yield has traded between 2.48% and 2.30%; a wide range but still holding mortgage rates in a narrow range with no significant increases. Our work remains bearish but not overly so. The longer outlook consensus is still bearish with the Fed expected to start normalizing rates at the Sept meeting.
PRICES @ 10:15 AM
10 yr note: -5/32 (15 bp) 2.37% +1 bp
5 yr note: -6/32 (18 bp) 1.67% +3 bp
2 Yr note: -3/32 (9 bp) 0.67% +3 bp
30 yr bond: +2/32 (6 bp) 3.14% unch
Libor Rates: 1 mo 0.186%; 3 mo 288%; 6 mo 0.461%; 1 yr 0.772%
30 yr FNMA 3.5 Aug: @9:30 102.73 -13 bp (+11 bp frm 9:30 yesterday)
15 yr FNMA 3.0: @9:30 103.26 -10 bp (-4 bp frm 9:30 yesterday)
30 yr GNMA 3.5: @9:30 103.70 -9 bp (+12 bp frm 9:30 yesterday)
Dollar/Yen: 124.02 +0.26 yen
Dollar/Euro: $1.0888 -$0.0062
Gold: $1143.50 -$3.90
Crude Oil: $51.82 +$0.41
DJIA: 18,068.27 +18.10
NASDAQ: 5136.79 +37.85
S&P 500: 2118.22 +10.82
