Rate outlook for the week starting February 21st 2012
Greece finally got its bailout money. The bailout included 130 billion Euros in aid, engineered a central bank transfer, and additional write downs by investors. US markets were closed yesterday when the deal was announced but European stocks rallied on the news. The problem with this bailout is that it is not a permanent solution it only provides a temporary avoidance of a Greek default and already today the European market fell back down. Also in order to get the money Greece had to agree to an additional 325 million euros in spending cuts. As unrest is growing in Greece it will be interesting to see if Greece will be able to keep up their end of the bargain on the spending cuts.
Today the 10 year US treasury yield is up on the news of the Greek bail out, as investors are backing off from the safety haven trade, but mortgage back securities were not as affected by the news. Remember traditionally the yield of the 10 year bond and mortgage backed securities tend to move in unison. Lately we are seeing the spread between the 10 year Treasury yield and mortgage backed securities narrowing. I think this a sign that investors are starting to realize that these investments backing the mortgage backed securities are by good loans unlike a few years back when the melt down happened.
This week is light on economic data other than $99B of Treasury auctions and January existing and new home sales. Oil has been rallying on concerns of Iran refusing to sell oil to Britain and France. Look for mortgage rates to stay stable this week unless there are any major news out of Europe or drastic results at the Treasury auction.
Tags: market preview, mortgage rates outlook