Mortgage prices declined by more than 1 point this week as optimism Greece would reach a last minute deal with creditors and stronger than expected U.S. economic data supported expectations of a September rate hike by the Fed.
Greece and its creditors remain deadlocked over a cash for reforms deal just days before a debt payment to the IMF falls due, leaving Greece close to bankruptcy. But there is hope a deal will be done this weekend.
Existing Home Sales surged to a 5 ½ year high in May as first-time buyers piled into the market, the latest indication that housing and overall economic activity were gaining steam in the second quarter. First-time home buyers accounted for 32% of the transactions.
New home sales jumped 2.2% in May beating analyst forecasts. It’s the strongest sales pace of new homes since February 2008. Another sign the housing market is thriving.
The MBA Mortgage Application Index posted a small overall gain of 1.6%. Refis increased 2.0% and Purchases were higher by 1.0%. Purchases are still running 65% of the overall activity.
Personal Income rose 0.5% in May, slightly higher than forecasted and Consumer Spending improved by +0.9% vs forecasts of +0.7%. Another sign of strength in the U.S. economy.
Consumer Sentiment saw a reasonably strong improvement in June, rising to 96.1 from 90.7 in May. With rising jobs and hourly wages, consumers were apparently able to shrug off rising gas prices.
The bond market had to absorb $90 billion in new Treasury note supply, which may have exerted additional pressure on the bond market. Traders typically sell Treasuries ahead of the auctions to make room for new supply.
Next week, the market is closed on Friday for the 4th of July holiday. The important Employment report for June will be released on Thursday, July 2nd. The market is expecting 232,000 new jobs to be created and the unemployment rate to dip to 5.4%.