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):
|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%||—|