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

It was a very busy weekend, as a last minute deal between Greece and their European creditors was made early this morning after more than 24 hours of consecutive negotiations.  Under the terms of the agreement, Greece will receive $86 billion Euros ($95 billion USD) over the next three years to support its economy and pay debts, as well as help the country recapitalize the Greek banking system. This marks Greece’s third bailout since 2010. Greece and Europe must be satisfied they fended off economic catastrophe and removal from the Euro.

However, Greek negotiators clearly missed their mark, as they received virtually none of the concessions they were hoping for from Europe. The deal executed appears to be worse for the Greeks than the proposal the Greek people (as instructed by Greek Prime Minister Alexis Tsipras) voted down in their historic referendum “no” vote a week ago.  In this deal, there are still significant austerity measures the Greek Parliament will need to ratify and begin implementing starting this Wednesday, including large tax increases, big cuts to pension spending and reduced tax expenditures.

Additionally, Greece will not receive a haircut on any of the previous debt owed and will be required to sell and/or privatize $50 billion Euros worth of Greek assets that will essentially be used as collateral to justify the bailout agreed to last night.

A Tough Deal for Greece

This is widely considered a rough deal for Prime Minister Tsipras and for the Greek people, but they found justification that keeping their economy from a monumental collapse and also being able to recapitalize their struggling banking system outweighed the concessions they ultimately had to agree on.

A risk on trade has naturally ensued, and stocks are higher worldwide with European and Asian stocks up at least 1.5%; U.S. equities hovering back towards 18,000 and 2,100 respectively; and the Greek 10-yr bond yield has dropped from 19% last Wednesday to 11.5% this morning.

The safe haven bid into U.S. treasuries continued its decline seen Friday afternoon. The U.S. 10-year is trading as high as 2.46% overnight.  We can now shift our focus back to America’s economy and the Fed, which has been all but ignored over the last two weeks.

Busy Week Ahead for the U.S. Economy

Speaking of the U.S. economy, we have a busy week of June data ahead, with highlights including tomorrow’s Retail Sales report, PPI and manufacturing reports on Wednesday, jobless claims and consumer confidence on Thursday, and housing, construction and CPI data on Friday.  No pertinent economic data was released earlier this morning, and there are no relevant government auctions this week.

Economic Calendar (Courtesy of the FNMA trading desk):

 

Date Time Event   Survey Actual Prior Revised
07/13/2015 14:00 Monthly Budget Statement Jun $50.0B — $70.5B —
07/14/2015 08:30 Retail Sales Advance MoM Jun 0.30% — 1.20% —
07/14/2015 08:30 Retail Sales Ex Auto MoM Jun 0.50% — 1.00% —
07/14/2015 08:30 Retail Sales Ex Auto and Gas Jun 0.50% — 0.70% —
07/14/2015 08:30 Retail Sales Control Group Jun 0.40% — 0.70% —
07/14/2015 08:30 Import Price Index MoM Jun 0.10% — 1.30% —
07/14/2015 08:30 Import Price Index YoY Jun -9.80% — -9.60% —
07/14/2015 09:00 NFIB Small Business Optimism Jun 98.5 — 98.3 —
07/14/2015 10:00 Business Inventories May 0.30% — 0.40% —
07/15/2015 07:00 MBA Mortgage Applications 10-Jul — — 4.60% —
07/15/2015 08:30 PPI Final Demand MoM Jun 0.20% — 0.50% —
07/15/2015 08:30 PPI Ex Food and Energy MoM Jun 0.10% — 0.10% —
07/15/2015 08:30 PPI Ex Food, Energy, Trade MoM Jun 0.10% — -0.10% —
07/15/2015 08:30 PPI Final Demand YoY Jun -0.90% — -1.10% —
07/15/2015 08:30 PPI Ex Food and Energy YoY Jun 0.70% — 0.60% —
07/15/2015 08:30 PPI Ex Food, Energy, Trade YoY Jun 0.60% — 0.60% —
07/15/2015 08:30 Empire Manufacturing Jul 3.25 — -1.98 —
07/15/2015 09:15 Industrial Production MoM Jun 0.20% — -0.20% —
07/15/2015 09:15 Capacity Utilization Jun 78.10% — 78.10% —
07/15/2015 09:15 Manufacturing (SIC) Production Jun 0.10% — -0.20% —
07/15/2015 14:00 U.S. Federal Reserve Releases Beige Book
07/16/2015 08:30 Initial Jobless Claims 11-Jul 285K — 297K —
07/16/2015 08:30 Continuing Claims 4-Jul 2300K — 2334K —
07/16/2015 09:45 Bloomberg Consumer Comfort 12-Jul — — 43.5 —
07/16/2015 09:45 Bloomberg Economic Expectations Jul — — 47.5 —
07/16/2015 10:00 Philadelphia Fed Business Outlook Jul 12 — 15.2 —
07/16/2015 10:00 NAHB Housing Market Index Jul 59 — 59 —
07/16/2015 16:00 Net Long-term TIC Flows May — — $53.9B —
07/16/2015 16:00 Total Net TIC Flows May — — $106.6B —
07/17/2015 08:30 Housing Starts Jun 1109K — 1036K —
07/17/2015 08:30 Housing Starts MoM Jun 7.00% — -11.10% —
07/17/2015 08:30 Building Permits Jun 1150K — 1275K 1250K
07/17/2015 08:30 Building Permits MoM Jun -8.00% — 11.80% 9.60%
07/17/2015 08:30 CPI MoM Jun 0.30% — 0.40% —
07/17/2015 08:30 CPI Ex Food and Energy MoM Jun 0.20% — 0.10% —
07/17/2015 08:30 CPI YoY Jun 0.10% — 0.00% —
07/17/2015 08:30 CPI Ex Food and Energy YoY Jun 1.80% — 1.70% —
07/17/2015 08:30 CPI Index NSA Jun 238.632 — 237.805 —
07/17/2015 08:30 CPI Core Index SA Jun 242.098 — 241.76 —
07/17/2015 08:30 Real Avg Weekly Earnings YoY Jun — — 2.30% 2.20%
07/17/2015 10:00 U. of Mich. Sentiment Jul P 96 — 96.1 —
07/17/2015 10:00 U. of Mich. Current Conditions Jul P — — 108.9 —
07/17/2015 10:00 U. of Mich. Expectations Jul P — — 87.8 —
07/17/2015 10:00 U. of Mich. 1 Yr Inflation Jul P — — 2.70% —
07/17/2015 10:00 U. of Mich. 5-10 Yr Inflation Jul P — — 2.60% —