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EU
Announces Larger Aid Package
The
biggest economic news this week was that the EU will provide a much larger aid
package than previously announced. On Monday, this news caused investors to
move funds to riskier assets and out of safer investments such as bonds.
This week's economic data contained few surprises. Later in the week,
successful results for the long-term Treasury auctions helped bond markets,
and mortgage rates ended the week near the lowest levels of the year.
Monday,
the EU and the IMF surprised investors with the announcement that they will
make available up to $1 trillion to support Greece and other EU members
which are experiencing economic troubles. This enormous amount of aid
demonstrates the commitment of the stronger European countries to
maintaining the European Union and allowing the weaker countries time to
recover. The Euro currency strengthened against the dollar and other
currencies, and global stock markets rallied strongly. Mortgage markets
were hurt by the news when investors reversed the flight to safety trade
and moved funds back into riskier assets such as stocks.
March
Pending Home Sales increased 5.3% from February, and were 21% higher than
one year ago at this time. The Pending Home Sales index, which measure
sales of existing homes based on contracts which have been signed but not
yet closed, is a leading indicator for the housing sector. The index
provides guidance for future Existing Home Sales reports. The chief
economist of the National Association of Realtors (NAR) suggested that the
home buyer tax credit has helped "stabilize the market".
Contracts had to be signed by the end of April to qualify for the tax
credit, so many buyers rushed to take advantage before the deadline. As a
result, the NAR chief economist expects "measurably lower sales"
in May. The growth in housing sector activity will then depend largely on
the performance of the economy and the labor market. The housing sector may
also benefit from increased availability of jumbo mortgages and other forms
of credit from non-governmental sources.
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