|Greece Trumps U.S. Data|
|Concerns about Greece overwhelmed stronger than expected U.S. economic data over the past week. Mortgage rates ended a little lower.Headlines about Greece have continued to influence U.S. mortgage rates. On Thursday, it was reported that IMF officials departed from their meeting with Greek officials due to a lack of progress. After months of negotiations without a deal, investors grew more concerned that no bailout agreement will be reached. It is not clear what impact a Greek default would have, and the uncertainty caused investors to shift to relatively safer assets, including U.S. mortgage-backed securities.Following the stronger than expected May Employment report, Tuesday’s JOLTS report provided additional evidence that the labor market continues to improve at a solid pace. Job openings in April rose to the highest level since December 2000. Employees also showed a high willingness to voluntarily leave their jobs, a sign of confidence that they will be able to find another job. Strong data is great for the economy, but it raises expectations for future inflation, which is negative for mortgage rates.
Thursday’s Retail Sales report also exceeded expectations. Retail sales ex-auto rose 1.0%. The next highest reading over the past year was just 0.4%. The strong results over the past three months suggest that the weakness in spending seen over the winter was due to temporary factors such as bad weather and port strikes.
Next week, the biggest event will be Wednesday’s Fed meeting. Investors will be looking for hints about the timing of the first federal funds rate hike. Before that, Industrial Production, an important indicator of economic activity, will be released on Monday. Housing Starts will come out on Tuesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. News about Greece likely will have an influence on U.S. mortgage rates as well.
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