It's Tuesday and GREECE is the word as it has been often over the last several months. Yesterday the benchmark bond sold off in a big way and it wasn't because existing home sales came in a bit better than expected. Lately, everything has been about Greece; Greece is the word, "Greece is the time, is the place, is the motion." This lyric from the 70s movie "Grease" is very true as the world is watching closely to see what the EU will do as Greece teeters on the brink of default.
The EU and Greece are trying to work out a deal that hopefully has more substance than glam so that they aren't just kicking the can down the road a bit more. The deal includes higher taxes in some areas as well as increasing the retirement age - this would certainly help increase the revenues to pay the debt that Greece owes but the citizenry may not be all on board.
As for the benchmark bond, it was down 59 basis points after a nice move up last week. Yesterday's losses erased most of last week's gains. This morning brought us mixed data with Durable Goods orders (ex-transportation) coming in at .5 which was slightly below the consensus of .6. New Home Sales came in at 546 vs. estimates of 525. However, the big driver is Greece. The benchmark bond started the day down and tested the 1st level of support at 102.58 but has since recovered a bit and is now only down 7 basis points after being down as much as 29 basis points.
Some experts are recommending floating - I think it's a bit tenuous. If you do float, take extra caution and watch the bond market very closely because the 10 year treasury has some room to the upside and that could take rates higher in mortgages as well. Feel free to contact me if I can help in any way - 702-812-1214. Make it a great day.