Tuesday February 17: Greek Optimism Again Supports Markets

S&P 500 reaches a record for the second day in a row on speculation that Greece and its creditors will reach a compromise tomorrow. S&P increases .2% to 2,100 and DJIA rises .2% to 18,047. Rising oil prices contribute to this increase in equities. Despite this increase, the VIX jumps to 15.8. The bund yield rises 2bp to .37%, while the treasury yield continues to climb 12bp to 2.14%.

According to an unconfirmed report, Greece will request an extension of its current loan agreement for six months, which ideally will temporarily resolve the standoff with Germany and other creditors. The report differentiates the existing loan agreement from the existing bailout program, and says that Greece will request only the loan agreement. The euro appreciates .5% 5o $1.1412 following this change in outlook compared to yesterday. Greece’s creditors want an agreement that is similar to the existing bailout which includes economic reforms and austerity measures, however Greece does not agree with these restrictions. On the other hand, Greece wants to raise the minimum wage, pension plans, and rehire many public employees who were previously fired. On Monday Greece was given until the end of the week to agree to an extension, however Prime Minister Tsipras insisted that he will not respond to an ultimatum.

Highest yielding dividend stocks fell last week as Treasury yields jumped last week, which could be a small glimpse of what will happen after rates rise later this year. Investors have poured into dividend stocks seeking annual payments as bond yields have been at record lows. These stocks include utility companies and REITs, and they fell an average of .4% last week as the S&P500 reached all time highs. The market for Fed funds futures reflects a 55% chance that rates will rise in September, and a 76% chance that rates will rise in December.

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Tuesday February 17: Greek Optimism Again Supports Markets

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