Attention on Greece
News about Greece had the greatest influence on U.S. mortgage rates over the past week. Strong U.S. housing data was offset by weaker data in durable orders and manufacturing. Mortgage rates moved a little lower.
The next Greek debt repayment is scheduled for June 5. Without a bailout, there is a risk that Greece will default on its debt. If this were to occur, the effects on the rest of the eurozone are difficult to predict. In typical fashion, investors have responded to the uncertainty by shifting to relatively safer assets, including U.S. mortgage-backed securities (MBS). Added demand for MBS helps mortgage rates move lower. Since investors reverse their positions when the uncertainty decreases, news reports about Greece have created volatility in U.S. mortgage rates. Over the past week, the net impact was slightly favorable for mortgage rates.
The housing data released over the past week was encouraging. April pending home sales rose 3% from March to the highest level since May 2006. They were 14% higher than one year ago. April new-home sales increased 7% from March, and they were 26% higher than a year ago. While the existing-home sales data for April showed a small monthly decline, pending and new-home sales reflect the more current housing market activity.
Next week, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, ISM Manufacturing and Core PCE will be released on Monday. The Core PCE price index is the Fed’s preferred inflation indicator. The ADP Employment Change and ISM Services will come out on Wednesday. In addition, the next repayment for Greece is scheduled for Friday. Investors will be watching for a bailout deal before this deadline.
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