Key Economic Commentary: Euro Zone Leaders Reach Deal to Rescue Greece
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):
Key Economic Commentary: Euro Zone Leaders Reach Deal to Rescue Greece
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):
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