Morning Report

Vital Statistics

	Last	Change	Percent
S&P Futures	1305.2	-9.6	-0.73%
Eurostoxx Index	2148.5	-44.3	-2.02%
Oil (WTI)	91.15	-0.7	-0.76%
LIBOR	0.467	0.000	0.00%
US Dollar Index (DXY)	81.71	0.218	0.27%
10 Year Govt Bond Yield	1.74%	-0.03%
RPX Composite Real Estate Index	176.2	0.6

Markets are lower this morning on GREXIT (Greek exit) fears and a lousy earnings report from Dell. Euro sovereign yields are generally lower, with the exception of Greece which is 22 basis points higher and approaching 30%. Remember, this is the post-reorg debt that is trading here. Their debt was trading around 35% before Greece did their restructuring about 10 weeks ago. The stress in Europe is pushing down bond yields here and MBS are up as well.

While the migration to tablets is hurting Dell, they also noted corporations are delaying spending.  Is it because IT spending is slowing in general, or is it that corporations have learned not to beta-test Microsoft operating systems (in this case Windows 8)?

The Congressional Budget Office weighs in on Taxmageddon. Punch line: The budget deficit will drop by $560 billion, and real GDP growth will be .5%, with a contraction of 1.3% in 1H and an expansion of 2.3% in 2H. Remember the government operates on a Sep fiscal, so they are predicting recession in the Sep 12 - Mar 13 time period. If we cancel the tax increases and spending cuts, CBO estimates that real GDP growth would be about 4.4% in real (not nominal) terms in CY13. That is an aggressive (with a capital "A") forecast.

DealBook has an interesting article on the possible unintended consequences of breaking up the big banks.

In other news, the NAR has declared the housing recovery to be underway. The MBA reported that mortgage applications increased 3.8% last week. New home sales in April were 343k, an increase of 3.3% MOM. The FHFA House Price index showed an increase of .55% QOQ and .5% YOY.  This is the first increase since early 2007.  Remember the FHFA index only looks at conforming loans, which is more of the "core" housing market.  It has proven to be a much less volatile index than Case-Schiller or RPX.

Chart:  FHFA House Price Index: