Mortgages saw a bit of a rally yesterday and into Wednesday morning, as the lack of economic data turned investor focus towards second quarter earnings reports. After disappointing earnings from large S&P companies like IBM and United Technologies, equities faded as the day went on and ended down almost 200 points. This wiped out all of the gains seen in equities at the end of last week and Monday, and a flight-to-quality bid into U.S. Treasuries followed. After starting the day in the 2.38% area, the 10-year treasury yield closed at 2.325% on Tuesday.
Wednesday morning, we finally had some economic data to dissect, as reports on the FHFA price index for May and existing home sales for June were released. The FHFA price index printed at +0.4%, right in line with expectations, and combined with a revision for the prior month from +0.3% to +0.4%, paints a continued strong outlook on home prices.
On a more important note, existing home sales far exceeded expectations last month, as 5.49 million home were sold, good for a 3.2% increase. A modest 0.9% increase had been expected. Sales are now 1% higher than their highest level in 2013. Important metrics like first-time homebuyer increases, all cash and investment property purchase decreases, and limited amounts of distressed properties included in Wednesday morning’s report show that housing is strong and will continue to support economic growth patterns. On Friday, we get the new home sales report for June, which should now be expected to show a beat from the current +0.4% expectation.
Moving over to Greece briefly, Prime Minister Tsipras is speaking before the Greek Parliament Wednesday to get more reforms passed as required by the terms of their new bailout. So far, everything appears to moving as planned on that front, so analysts are expecting for that to pass without much trouble.