Last Week in Review: Greece’s ongoing financial saga moves the markets, along with continuing announcements on more whopping amounts of debt supply being pumped out.

Forecast for the Week: This week will bring a wide range of reports, including looks at consumer attitudes, the Fed’s policy, employment, manufacturing, and Gross Domestic Product.

View: There’s less than one week left before the Homebuyers Tax Credit expires on April 30th…read the details, and pass on to anyone who needs to know more!

Last Week In Review

“IT’S ALL GREEK TO ME.” The markets continue to be focused on – and influenced by – Greece’s ongoing financial saga. Stocks took a hit last Thursday when Greece’s budget deficit was reported to be worse than previously thought, causing uncertainty and anxiety in the markets. The next day, the saga continued when Greek Prime Minister George Papandreou asked the European Union and International Monetary Fund to activate their huge $45 Billion Euro aid package. That news helped relieve some of the uncertainty in the markets, but this story is far from over. Greece will need to take some dramatic measures to bring their budget deficit to a significantly lower level.

The $45 Billion Euro bailout for Greece wasn’t the only whopping figure in the news last week. Here at home, the U.S. Treasury Department announced that it will unload $129 Billion of debt this week in 5-year Treasury Inflation Protected Securities and 2-, 5- and 7-year Notes. The massive amount of debt supply being loaded into the markets just keeps on coming – and it’s getting larger. As you can see from the chart below, the Treasury auctions have more than doubled since the 2nd quarter of 2008…and this doesn’t even include the regularly scheduled T-Bill auctions each week or the monthly 30-year Bond auctions. This week’s huge amount of supply could prevent Bond prices – and home loan rates – from improving when it hits the markets.

Speaking of more supply…the Fed announced last week that it may start trimming its balance sheet by selling some of its Mortgage Backed Securities assets as early as the 3rd or 4th quarter of this year. Remember, the Fed recently ended its purchase program in which it purchased $1.25 Trillion in Mortgage Backed Securities to help lower home loan rates and stabilize the housing sector. Since the program ended, the market has been very volatile. Despite the fluctuations, rates remain good overall, but once the Fed starts to sell some of their huge holdings, rates will likely rise as even more supply comes into the market.

Overall, rates ended the week slightly worse than where they started, but still at very attractive levels. That makes now a crucial time to take advantage of the opportunities that exist – including the Homebuyers Tax Credit, which is about to expire!

THERE’S LESS THAN ONE WEEK LEFT BEFORE THE HOMEBUYERS TAX CREDIT EXPIRES ON APRIL 30! CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR IMPORTANT DETAILS.

Forecast for the Week

After a busy week of economic reports last week, this week doesn’t slow up at all. On tap is a look at how consumers feel about the slowly recovering economy with the Consumer Confidence report on Tuesday and the Consumer Sentiment Index on Friday. In the prior reports, Consumer Confidence came in higher than expectations, while Consumer Sentiment dropped. The markets will be watching both these reports for indications of how consumers feel about the job market and their finances.

We’ll also hear from the Fed this week with the Fed’s Monetary Policy and Fed Funds Rate decision on Wednesday. With future inflation concerns on the minds of some Fed members, it will be interesting to see if the Fed continues to use the now famous statement, “rates will stay exceptionally low for an extended period.”

The weekly Initial Jobless Claims report comes out Thursday, and after a worse-than-expected report last week, the markets will be tuned in closely to this week’s update.

Finally, the week ends on a busy note. Friday, we’ll get a look at labor costs with the Employment Cost Index, the manufacturing industry with the Chicago PMI, and goods and services in the US with the Gross Domestic Product report.

In addition to these reports, the Treasury Department will auction off the $129 Billion of debt mentioned above. That breaks down to auctions of $11 Billion in 5-year TIPS (treasury inflated-protected securities) on Monday, $44 Billion in 2-year Notes on Tuesday, $42 Billion in 5-year Notes on Wednesday and $32 Billion in 7-year Notes on Thursday. That’s a whopping amount of supply, and it could move the markets depending on how it’s received.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Mortgage Bonds have not been able to close above technical resistance at the 50-Day Moving Average since the end of March.