Morning Report – The week ahead 12/29/14

Markets are down small on no real news. Bonds and MBS are up.

This week promises to be relatively quiet with the New Year’s holiday in the middle of the week. There might be some volatility in bonds as dealers square up their positions for year’s end.

Greece is back in the news, as political wrangling risks the rescue package they have from the ECB. The 10 year Greek bond yield is up 130 basis points this morning, to 9.8%. At the margin, this will help keep a bid under Treasuries.

Home Prices are up 4.5% year-over-year, according to Black Knight Financial Services, which puts prices about 10% off of their peak levels in June 2006. We will get Case-Shiller tomorrow.

Will 2015 herald the return of the first time homebuyer? It is looking like it might happen, as lending loosens up, the job market improves, and supply comes on line. Note the homebuilders like D.R. Horton and KB Home are rolling out more starter homes.

Holiday spending was strong, according to data released by MasterCard. They saw spending up 5.5%, while the National Retail Federation saw sales up 4.1%. Online sales rose 14%. Pent-up demand is beginning to be satisfied. Low gasoline prices are a big help.

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