Market commentary

Two key pieces of key data released this morning have had little effect on the markets. Existing home sales rose 6.8% in March as buyers rush to take advantage of the home buyer tax credit that expires at the end of April. And, the Producer Price Index rose 0.7% on higher energy and food prices, although excluding these items the index was higher by only 0.1%.

The key factor affecting bond and stock markets today is the deepening financial crisis in Greece, which if not resolved, will have significant impact on European financial institutions. U.S. stock markets are declining in tandem with the European markets; however, this has been somewhat positive for U.S. treasuries. Mortgage bonds are slightly improved from Wednesday’s market close, but by only a few basis points.

Next week the U.S. Treasury will auction a record amount of 2yr, 5yr and 7yr notes, and the Federal Reserve begins a two day policy meeting on Tuesday, with a rate decision and policy statement coming Wednesday afternoon. The looming crisis in Greece, the huge supply of new U.S. debt coming to market, and some uncertainty surrounding the Fed policy statement could cause significant volatility in the markets, and it is difficult to determine if that will be positive or negative for mortgage prices.