By Danny Jasper, Senior Vice President, Capital Markets, Castle & Cooke Mortgage, LLC

After rallying on Friday — due to pessimism in Greece and fear of a “Grexit” from the European Union (EU) — optimism has returned to the markets this morning as a deal between the Greeks and the European Central Bank (ECB) is within range.  Investors are trading as if a deal is likely to be struck this week prior to the Greeks needing to make their large payment by the end of the month, as a new, last chance summit of leaders started today.

Over the weekend, reports showed that Greece presented a new budget proposal where they caved a bit on items like pension cuts and a value-added tax (VAT).  The leverage at this point seems to lie in the hands of Greek creditors, as the Greeks pulled out approximately $1 billion Euros per day last week from Greek banks.

There is a good chance that a deal will likely once again be struck at the last minute, which will make investors happy, cause German and Greek yields to drop and decrease the flight-to-quality bid into U.S. treasuries that led to Friday’s 10-year treasury rally. However, Greece will still be facing numerous challenges on how to get its budget under control in the future.

For now, investors are brushing that aside and hoping for the quick, can-kicking fix, as Greek yields are back down to 11%. Eurozone stocks are up 2.5%, U.S. equities are rallying, and the 10-year yield is back up to the 2.35% range.

U.S. Economic News: Busy Week Ahead

In U.S. economic news, we have a pretty busy week ahead.  There are three key housing reports, with existing home sales data already released this morning for May, showing a strong beat at +5.1% vs. +4.4% expectations, and new home sales and the FHFA (Federal Housing Finance Agency) price index tomorrow.  With pending home sales and builder confidence previously showing solid gains, this should be a good week for housing.

Other economic highlights this week include Tuesday’s durable goods orders for May (which is expected to be consistent with April), another Q1 revision to GDP and personal consumption on Wednesday, and perhaps most importantly, personal income and spending reports for May on Thursday.

With the May retail sales report coming in strong last week, the personal spending report on Thursday should help support the feeling that U.S. consumers are now spending their new money from more jobs and higher wages.  The survey is calling for a 0.5% increase in income and 0.7% increase in spending.  We close the week with the University of Michigan reports on consumer confidence and inflation expectations.

There are also some pertinent government auctions to be mindful of this week, with the Fed selling $26 billion in 2 year notes tomorrow, $35 billion in 5-year notes Wednesday, and $29 billion in 7-year notes on Thursday.

Currently, the DJIA is rallying big on the Greece sentiment, up 156 points to 18,171.  The S&P is up 18 to 2,128, and the Nasdaq is once again trading at a record high, up 41 to 5,158.

Economic Calendar for June 22 – 26, 2015 (courtesy of the FNMA trading desk):

Date Time Event Survey Prior
6/22/2015 8:30 Chicago Fed Nat Activity Index May 0.12 -0.15
6/22/2015 10:00 Existing Home Sales May 5.28M 5.04M
6/22/2015 10:00 Existing Home Sales MoM May 4.80% -3.30%
6/23/2015 8:30 Durable Goods Orders May -0.60% -0.50%
6/23/2015 8:30 Durables Ex Transportation May 0.50% 0.50%
6/23/2015 8:30 Cap Goods Orders Nondef Ex Air May 0.50% 1.00%
6/23/2015 8:30 Cap Goods Ship Nondef Ex Air May 0.80%
6/23/2015 9:00 FHFA House Price Index MoM Apr 0.50% 0.30%
6/23/2015 9:45 Markit US Manufacturing PMI Jun P 54.2 54
6/23/2015 10:00 New Home Sales May 525K 517K
6/23/2015 10:00 New Home Sales MoM May 1.60% 6.80%
6/23/2015 10:00 Richmond Fed Manufact. Index Jun 4 1
6/24/2015 7:00 MBA Mortgage Applications 19-Jun -5.50%
6/24/2015 8:30 GDP Annualized QoQ 1Q T -0.20% -0.70%
6/24/2015 8:30 Personal Consumption 1Q T 2.00% 1.80%
6/24/2015 8:30 GDP Price Index 1Q T -0.10% -0.10%
6/24/2015 8:30 Core PCE QoQ 1Q T 0.80% 0.80%
6/25/2015 8:30 Personal Income May 0.50% 0.40%
6/25/2015 8:30 Personal Spending May 0.70% 0.00%
6/25/2015 8:30 Real Personal Spending May 0.50% 0.00%
6/25/2015 8:30 PCE Deflator MoM May 0.30% 0.00%
6/25/2015 8:30 PCE Deflator YoY May 0.20% 0.10%
6/25/2015 8:30 PCE Core MoM May 0.10% 0.10%
6/25/2015 8:30 Initial Jobless Claims 20-Jun 273K 267K
6/25/2015 8:30 PCE Core YoY May 1.20% 1.20%
6/25/2015 8:30 Continuing Claims 13-Jun 2223K 2222K
6/25/2015 9:45 Markit US Composite PMI Jun P 56
6/25/2015 9:45 Markit US Services PMI Jun P 56.5 56.2
6/25/2015 9:45 Bloomberg Consumer Comfort 21-Jun 40.9
6/25/2015 11:00 Kansas City Fed Manf. Activity Jun -10 -13
6/26/2015 10:00 U. of Mich. Sentiment Jun F 94.6 94.6