"IT'S ALL GREEK TO ME." The markets continue to be focused on Greece...

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.

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Chart: Treasury Note Auctions (By Quarter)

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!