Bond markets made a quick head fake in a weaker direction following the better-than-expected Consumer Sentiment release at 9:55am, but must have quickly remembered that it's Europe, and not the domestic consumer, that's at the heart of the ongoing epic flight-to-safety. Indeed, today is one of those days where bond markets and the European currency are very well linked-up, the latter taking it's first major cue of the morning on news out of Spain that its wealthiest province officially asked for help from the Spanish government to service its debt. Since then, the Euro fell to test a technical boundary at 1.25, which set up the lows that began the ensuing range trade with the highs ostensibly inspired by levels immediately preceding the Spain news. It's all right here in this chart... (hide)

* Consumer Sentiment at 79.3 vs 77.8 consensus/previous
* Current Conditions 87.2 vs 87.1
* Expectations 74.3 vs 71.5
* Main Index highest since 10/2007
* current conditions highest since Jan 2008
* expectations highest since July 2007

(Reuters) - U.S. consumer sentiment rose to its highest level in more than four years in May as Americans stayed optimistic about the job market, while higher income households expected to see bigger wage increases, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same. It was the highest level since October 2007.

"Unfortunately, consumer confidence is still extremely vulnerable to a reversal, as occurred in the past two years," survey director Richard Curtin said in a statement. "While their most optimistic expectation for job growth could go unfulfilled without much harm, if the recent slowdown in job growth persists in the months ahead, it could form the basis for a third retreat in confidence." (hide)

"The Mortgage Bankers Association (MBA) today announced it is increasing its mortgage origination forecast for 2012 by almost $200 billion, due entirely to an increase in refinances. MBA now expects that mortgage originations will reach $1.28 trillion in 2012, up from $1.26 trillion in 2011.

Refinance originations are now expected to total $870 billion in 2012, an almost identical amount to 2011. MBA is slightly lowering its purchase originations forecast for 2012 from $415 billion to $409 billion." (hide)

30-year fixed-rate mortgage (FRM) averaged 3.78 percent with an average 0.8 point for the week ending May 24, 2012, down from last week when it averaged 3.79 percent. Last year at this time, the 30-year FRM averaged 4.60 percent.

15-year FRM this week averaged 3.04 percent with an average 0.7 point, unchanged from last week. A year ago at this time, the 15-year FRM averaged 3.78 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent this week, with an average 0.6 point, unchanged from last week. A year ago, the 5-year ARM averaged 3.41 percent.

1-year Treasury-indexed ARM averaged 2.75 percent this week with an average 0.4 point, down from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.11 percent. (hide)

* Headline Durables +0.2 vs +0.5 consensus
* Excluding Transportation -0.6 vs +0.9 consensus


New orders for manufactured durable goods in April increased $0.3 billion or 0.2 percent to $215.5 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 3.7 percent March decrease. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders increased 1.2 percent.

Transportation equipment, also up two of the last three months, had the largest increase, $1.3 billion or 2.1 percent to $62.2 billion. This was due to motor vehicles and parts, which increased $2.3 billion.

Shipments of manufactured durable goods in April, up four of the last five months, increased $1.5 billion or 0.7 percent to $222.7 billion. This followed a 1.0 percent March increase.

Transportation equipment, also up four of the last five months, had the largest increase, $1.9 billion or 3.1 percent to $63.8 billion. This followed a 2.3 percent March increase.

Unfilled orders for manufactured durable goods in April, down following twenty-seven consecutive monthly increases, decreased $0.7 billion or 0.1 percent to $985.3 billion. This followed a slight March increase. Transportation equipment, down two consecutive months, had the largest decrease, $1.6 billion or 0.3 percent to $566.4 billion.

Inventories of manufactured durable goods in April, up twenty-seven of the last twenty-eight months, increased $1.1 billion or 0.3 percent to $364.1 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent March increase.

Machinery, up twenty-five of the last twenty-six months, had the largest increase, $1.1 billion or 1.7 percent to $65.2 billion. This was also at the highest level since the series was first published on a NAICS basis. (hide)

*Claims 370k vs 370k consensus
* Continued Claims 3.26 mln vs 3.25 mln consensus
* Previous week revised higher to 372k

In the week ending May 19, the advance figure for seasonally adjusted initial claims was 370,000, a decrease of 2,000 from the previous week's revised figure of 372,000. The 4-week moving average was 370,000, a decrease of 5,500 from the previous week's revised average of 375,500.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 12, unchanged from the prior week's unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending May 12 was 3,260,000, a decrease of 29,000 from the preceding week's revised level of 3,289,000. The 4-week moving average was 3,271,500, a decrease of 17,250 from the preceding week's revised average of 3,288,750. (hide)

There are a few things working against bond markets at the moment, not the least of which is the fact that they've rallied rather ferociously earlier this morning and are showing signs of tiring. But like the rally itself, those "signs of tiring" have more to do with what's going on in correlated markets as opposed to bond markets themselves. In other words, if the proper cues were given from stocks, the Euro, and European bonds, then US Treasuries and MBS might not look so exhausted.

But as it stands, the aforementioned 'usual suspects' are doing more to put up road blocks for advancing bond markets as opposed to waving them through recent resistance levels. The Euro saw it's lowest bounce of the day around 12:30pm New York time. Surprise surprise, so did stocks. That rebound in "risk-on" (and believe us, we use the term 'rebound' very loosely) has translated to a bit of momentum for stocks and a bit of sideways indecision for bond markets.

Basically, the cues are not presently there for bond markets to keep on rallying. The 5yr Auction was mostly a non-event, but wasn't a net-positive for longer-term yields. Perhaps the biggest consideration at the moment is that the Fed is buying (scheduled "twist" buying) 6-8yr Treasuries at the moment, which we're tempted to credit with keeping the mid-to-long end of the yield curve a bit better-sponsored than it otherwise might be.

While we certainly can't predict or know what will happen at 2pm when that buying is done, we are quite interest in what markets do at that time, if anything. If stocks and the Euro continue to recover, and Treasury yields continue holding some sideways ground at current levels, we could be looking at the best levels of the day as a thing of the past. Then again, a Euro-zone official might say something interesting that counteracts any of this potentially pent-up negative energy.

Either way, we'd keep an eye on an MBS pivot at 104-14 in Fannie 3.5's, and are especially interested in how it's doing in about 25 minutes from now. If prices fall decidedly lower, lenders would likely be considering negative reprices with a break of 104-12. In other words, a break below 104-14 means it's time to pay closer attention, and a break of 104-12 would warrant an increasing level of concern. (hide)

U.S. house prices rose modestly in the first quarter of 2012 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The FHFA HPI was up 0.6 percent on a seasonally adjusted basis since the fourth quarter of 2011. The HPI is calculated using home sales price information from Fannie Mae and Freddie Mac mortgages. Seasonally adjusted house prices rose 0.5 percent from the first quarter of 2011 to the first quarter of 2012. FHFA’s seasonally adjusted monthly index for March was up 1.8 percent from February.

“Consistent with other housing market indicators, the FHFA HPI showed stronger house prices in the first quarter, most notably in March,” said FHFA Principal Economist Andrew Leventis. “Increased affordability and a somewhat smaller inventory of homes for sale are positively impacting house prices.”

FHFA’s expanded-data house price index, a metric introduced in August 2011 that adds transactions information from county recorder offices and the Federal Housing Administration to the HPI data sample, rose 0.2 percent over the latest quarter. Over the latest four quarters, the index is down 1.3 percent. For individual states, price changes reflected in the expandeddata measure and the traditional purchase-only HPI are compared on pages 24-26.

While the national, purchase-only house price index rose 0.5 percent from the first quarter of 2011 to the first quarter of 2012, prices of other goods and services rose 3.2 percent over the same period. Accordingly, the inflation-adjusted price of homes fell approximately 2.6 percent over the latest year. (hide)

(Reuters) - New single-family home sales rose more than expected in April and prices pushed higher, further evidence the housing market was turning the corner.

The Commerce Department said on Wednesday sales increased 3.3 percent to a seasonally adjusted 343,000-unit annual rate after a 332,000-unit pace in March.

Economists polled by Reuters had forecast sales at a 335,000-unit rate in April. Compared to April last year, new home sales were up 9.9 percent.

The data, coming on the heels of a report on Tuesday showing home resales hit a two-year high in April, suggested the housing market recovery was gaining traction.

It also highlighted the economy's underlying strength, even though job growth has slowed in recent months. The weak housing market has been the Achilles heel of the economy's recovery from the 2007-09 recession, as falling home values restrain consumer spending.

Signs of life in the housing market were also bolstered by a 0.7 percent rise in the median price of a new home last month to $235,700 from March. Compared to April last year, the median price was up 4.9 percent. (hide)

Markets bounced on Tuesday as the magic word "eurobonds" was heard — new French president Francois Hollande is keen and Christine Lagarde at the International Monetary Fund has endorsed the principle of more debt-sharing in the eurozone. Today share prices are down partly because investors have remembered that we've been round the houses on eurobonds several times already during this crisis and the debate always comes back to the same point: Germany is reluctant to underwrite the debts of its neighbours. That reluctance looks entrenched as ever, whatever Hollande and Lagarde might wish.

In what circumstances might German budge? Gary Silverman of Swordfish Research has the answer — "only at one minute to midnight if the alternative was a complete collapse of the system." (hide)

Bond markets made a quick head fake in a weaker direction following the better-than-expected Consumer Sentiment release at 9:55am, but must have quickly remembered that it's Europe, and not the domestic consumer, that's at the heart of the ongoing epic flight-to-safety. Indeed, today is one of those days where bond markets and the European currency are very well linked-up, the latter taking it's first major cue of the morning on news out of Spain that its wealthiest province officially asked for help from the Spanish government to service its debt. Since then, the Euro fell to test a technical boundary at 1.25, which set up the lows that began the ensuing range trade with the highs ostensibly inspired by levels immediately preceding the Spain news. It's all right here in this chart... (hide)

* Consumer Sentiment at 79.3 vs 77.8 consensus/previous
* Current Conditions 87.2 vs 87.1
* Expectations 74.3 vs 71.5
* Main Index highest since 10/2007
* current conditions highest since Jan 2008
* expectations highest since July 2007

(Reuters) - U.S. consumer sentiment rose to its highest level in more than four years in May as Americans stayed optimistic about the job market, while higher income households expected to see bigger wage increases, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same. It was the highest level since October 2007.

"Unfortunately, consumer confidence is still extremely vulnerable to a reversal, as occurred in the past two years," survey director Richard Curtin said in a statement. "While their most optimistic expectation for job growth could go unfulfilled without much harm, if the recent slowdown in job growth persists in the months ahead, it could form the basis for a third retreat in confidence." (hide)

"The Mortgage Bankers Association (MBA) today announced it is increasing its mortgage origination forecast for 2012 by almost $200 billion, due entirely to an increase in refinances. MBA now expects that mortgage originations will reach $1.28 trillion in 2012, up from $1.26 trillion in 2011.

Refinance originations are now expected to total $870 billion in 2012, an almost identical amount to 2011. MBA is slightly lowering its purchase originations forecast for 2012 from $415 billion to $409 billion." (hide)

30-year fixed-rate mortgage (FRM) averaged 3.78 percent with an average 0.8 point for the week ending May 24, 2012, down from last week when it averaged 3.79 percent. Last year at this time, the 30-year FRM averaged 4.60 percent.

15-year FRM this week averaged 3.04 percent with an average 0.7 point, unchanged from last week. A year ago at this time, the 15-year FRM averaged 3.78 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent this week, with an average 0.6 point, unchanged from last week. A year ago, the 5-year ARM averaged 3.41 percent.

1-year Treasury-indexed ARM averaged 2.75 percent this week with an average 0.4 point, down from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 3.11 percent. (hide)

* Headline Durables +0.2 vs +0.5 consensus
* Excluding Transportation -0.6 vs +0.9 consensus


New orders for manufactured durable goods in April increased $0.3 billion or 0.2 percent to $215.5 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 3.7 percent March decrease. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders increased 1.2 percent.

Transportation equipment, also up two of the last three months, had the largest increase, $1.3 billion or 2.1 percent to $62.2 billion. This was due to motor vehicles and parts, which increased $2.3 billion.

Shipments of manufactured durable goods in April, up four of the last five months, increased $1.5 billion or 0.7 percent to $222.7 billion. This followed a 1.0 percent March increase.

Transportation equipment, also up four of the last five months, had the largest increase, $1.9 billion or 3.1 percent to $63.8 billion. This followed a 2.3 percent March increase.

Unfilled orders for manufactured durable goods in April, down following twenty-seven consecutive monthly increases, decreased $0.7 billion or 0.1 percent to $985.3 billion. This followed a slight March increase. Transportation equipment, down two consecutive months, had the largest decrease, $1.6 billion or 0.3 percent to $566.4 billion.

Inventories of manufactured durable goods in April, up twenty-seven of the last twenty-eight months, increased $1.1 billion or 0.3 percent to $364.1 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent March increase.

Machinery, up twenty-five of the last twenty-six months, had the largest increase, $1.1 billion or 1.7 percent to $65.2 billion. This was also at the highest level since the series was first published on a NAICS basis. (hide)

*Claims 370k vs 370k consensus
* Continued Claims 3.26 mln vs 3.25 mln consensus
* Previous week revised higher to 372k

In the week ending May 19, the advance figure for seasonally adjusted initial claims was 370,000, a decrease of 2,000 from the previous week's revised figure of 372,000. The 4-week moving average was 370,000, a decrease of 5,500 from the previous week's revised average of 375,500.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 12, unchanged from the prior week's unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending May 12 was 3,260,000, a decrease of 29,000 from the preceding week's revised level of 3,289,000. The 4-week moving average was 3,271,500, a decrease of 17,250 from the preceding week's revised average of 3,288,750. (hide)

There are a few things working against bond markets at the moment, not the least of which is the fact that they've rallied rather ferociously earlier this morning and are showing signs of tiring. But like the rally itself, those "signs of tiring" have more to do with what's going on in correlated markets as opposed to bond markets themselves. In other words, if the proper cues were given from stocks, the Euro, and European bonds, then US Treasuries and MBS might not look so exhausted.

But as it stands, the aforementioned 'usual suspects' are doing more to put up road blocks for advancing bond markets as opposed to waving them through recent resistance levels. The Euro saw it's lowest bounce of the day around 12:30pm New York time. Surprise surprise, so did stocks. That rebound in "risk-on" (and believe us, we use the term 'rebound' very loosely) has translated to a bit of momentum for stocks and a bit of sideways indecision for bond markets.

Basically, the cues are not presently there for bond markets to keep on rallying. The 5yr Auction was mostly a non-event, but wasn't a net-positive for longer-term yields. Perhaps the biggest consideration at the moment is that the Fed is buying (scheduled "twist" buying) 6-8yr Treasuries at the moment, which we're tempted to credit with keeping the mid-to-long end of the yield curve a bit better-sponsored than it otherwise might be.

While we certainly can't predict or know what will happen at 2pm when that buying is done, we are quite interest in what markets do at that time, if anything. If stocks and the Euro continue to recover, and Treasury yields continue holding some sideways ground at current levels, we could be looking at the best levels of the day as a thing of the past. Then again, a Euro-zone official might say something interesting that counteracts any of this potentially pent-up negative energy.

Either way, we'd keep an eye on an MBS pivot at 104-14 in Fannie 3.5's, and are especially interested in how it's doing in about 25 minutes from now. If prices fall decidedly lower, lenders would likely be considering negative reprices with a break of 104-12. In other words, a break below 104-14 means it's time to pay closer attention, and a break of 104-12 would warrant an increasing level of concern. (hide)

U.S. house prices rose modestly in the first quarter of 2012 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The FHFA HPI was up 0.6 percent on a seasonally adjusted basis since the fourth quarter of 2011. The HPI is calculated using home sales price information from Fannie Mae and Freddie Mac mortgages. Seasonally adjusted house prices rose 0.5 percent from the first quarter of 2011 to the first quarter of 2012. FHFA’s seasonally adjusted monthly index for March was up 1.8 percent from February.

“Consistent with other housing market indicators, the FHFA HPI showed stronger house prices in the first quarter, most notably in March,” said FHFA Principal Economist Andrew Leventis. “Increased affordability and a somewhat smaller inventory of homes for sale are positively impacting house prices.”

FHFA’s expanded-data house price index, a metric introduced in August 2011 that adds transactions information from county recorder offices and the Federal Housing Administration to the HPI data sample, rose 0.2 percent over the latest quarter. Over the latest four quarters, the index is down 1.3 percent. For individual states, price changes reflected in the expandeddata measure and the traditional purchase-only HPI are compared on pages 24-26.

While the national, purchase-only house price index rose 0.5 percent from the first quarter of 2011 to the first quarter of 2012, prices of other goods and services rose 3.2 percent over the same period. Accordingly, the inflation-adjusted price of homes fell approximately 2.6 percent over the latest year. (hide)

(Reuters) - New single-family home sales rose more than expected in April and prices pushed higher, further evidence the housing market was turning the corner.

The Commerce Department said on Wednesday sales increased 3.3 percent to a seasonally adjusted 343,000-unit annual rate after a 332,000-unit pace in March.

Economists polled by Reuters had forecast sales at a 335,000-unit rate in April. Compared to April last year, new home sales were up 9.9 percent.

The data, coming on the heels of a report on Tuesday showing home resales hit a two-year high in April, suggested the housing market recovery was gaining traction.

It also highlighted the economy's underlying strength, even though job growth has slowed in recent months. The weak housing market has been the Achilles heel of the economy's recovery from the 2007-09 recession, as falling home values restrain consumer spending.

Signs of life in the housing market were also bolstered by a 0.7 percent rise in the median price of a new home last month to $235,700 from March. Compared to April last year, the median price was up 4.9 percent. (hide)

Markets bounced on Tuesday as the magic word "eurobonds" was heard — new French president Francois Hollande is keen and Christine Lagarde at the International Monetary Fund has endorsed the principle of more debt-sharing in the eurozone. Today share prices are down partly because investors have remembered that we've been round the houses on eurobonds several times already during this crisis and the debate always comes back to the same point: Germany is reluctant to underwrite the debts of its neighbours. That reluctance looks entrenched as ever, whatever Hollande and Lagarde might wish.

In what circumstances might German budge? Gary Silverman of Swordfish Research has the answer — "only at one minute to midnight if the alternative was a complete collapse of the system." (hide)

(Reuters) - Euro zone officials have agreed that each euro zone country must prepare an individual contingency plan in the eventuality that Greece decides to leav the single currency area, two eurozone officials said on Wednesday.

The agreement was reached during a teleconference of the Eurogroup Working Group (EWG), which started at 1300 GMT on Monday and lasted for about one hour.

As well as confirmation from two officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.

The EWG consists of officials who prepare meetings of finance ministers and also form the board of the temporary bailout fund, the European Financial Stability Facility (EFSF).

"The EWG agreed that each euro zone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro," said one euro zone official familiar with what was discussion on the call.

"Nothing was prepared so far on the euro zone level for now, for fear of leaks," the official said. (hide)

In a land of ancient myths, modern Greeks have created some of their own about their near-bankrupt country's future as an integral part of a Europe that will never kick them out.

Solemn warnings from abroad that Athens cannot stay in the euro while rejecting the terms of its international bailout are widely disbelieved.

However bad their prospects, many Greeks seem to think that since money to bail them out was found in the past, it will be found again, whatever politicians say.

Nor do they believe that Europe will simply cast them loose, despite growing signs that Greece is heading for the exit from the single currency and towards the economic and social catastrophe that would follow.

"There's a lot of money in this country, they just need to tax the rich and it would solve so many problems," said seamstress Argiro Maniati, 55.

Working furiously at her sewing machine surrounded by tall piles of mended clothes her customers can't afford to collect, Maniati fully embraces the myth that Greece's membership of the euro can never die.

Like many Greeks who punished mainstream parties in a fruitless May 6 election that has brought Greece to the edge of a political abyss, she thinks politicians have exaggerated the threat of euro expulsion to scare up votes for failed policies. (hide)

(Reuters) - Germany dismissed a French-led call for euro zone nations to issue common bonds, a day before a European Union leaders' summit which investors are looking to for new measures to counter the bloc's debt crisis.

After a torrid week, stock markets rallied on optimism that the Wednesday summit would produce measures to foster growth and ward off the threat of contagion should Greece exit the euro.

The FTSEurofirst 300 index of top European shares was up 1.2 percent by 1230 GMT and Spanish and Italian borrowing costs fell, leaving scope for disappointment if the EU leaders underwhelm.

French President Francois Hollande will push a proposal for metalizing European debt at the informal summit, a scheme which many economists and policymakers say could be one of the most effective ways of restoring market confidence.

Hollande has also called for a focus on growth rather than austerity.

But there is no sign that Germany, the EU's paymaster, is prepared to soften its opposition. It says more progress is needed first on coordinating fiscal policies, a stance in which it has the backing of the Netherlands, Finland and Austria among others.

"Tomorrow's meeting will not deliver any landmark solution. The market is likely to be more prone to disappointment," said Matteo Regesta, a strategist at BNP Paribas.

A senior German official said Berlin did not believe jointly issued euro zone bonds were the solution and would not change its view, at least in the near-term.

"That's a firm conviction which will not change in June," the official said at a German government briefing. A second summit will be held at the end of next month. (hide)

Manufacturing activity in the central Atlantic region expanded in May for the sixth consecutive month but at a more moderate pace than a month ago, according to the Richmond Fed's latest survey. Looking at the main components of activity, shipments held steady and employment grew at a faster rate, while new orders grew at a rate well below April's pace. Most other indicators also suggested a slowdown in growth. District contacts reported that backlogs turned negative and capacity utilization grew more slowly. Vendor lead-time grew at a slower rate, while raw materials inventories grew at a quicker pace.

In spite of the recent moderation in activity, assessments for business activity over the next six months remained generally positive since our last report. Contacts at more firms anticipated that shipments, new orders, backlogs, capacity utilization, and capital expenditures would continue to grow at a solid pace.

Survey assessments of current prices revealed that both raw materials and finished goods prices grew at a somewhat slower rate in May than a month ago. Over the next six months, respondents expected growth in both raw materials and finished goods prices to rise at a somewhat slower pace than they had anticipated last month. (hide)

Existing-home sales rose in April and remain above a year ago, while home prices continued to rise, according to the National Association of Realtors®. The improvements in sales and prices were broad based across all regions.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3.4 percent to a seasonally adjusted annual rate of 4.62 million in April from a downwardly revised 4.47 million in March, and are 10.0 percent higher than the 4.20 million-unit level in April 2011.

Lawrence Yun, NAR chief economist, said the housing recovery is underway. “It is no longer just the investors who are taking advantage of high affordability conditions. A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices,” he said. “The general downtrend in both listed and shadow inventory has shifted from a buyers’ market to one that is much more balanced, but in some areas it has become a seller’s market.”

Total housing inventory at the end of April rose 9.5 percent to 2.54 million existing homes available for sale, a seasonal increase which represents a 6.6-month supply2 at the current sales pace, up from a 6.2-month supply in March. Listed inventory is 20.6 percent below a year ago when there was a 9.1-month supply; the record for unsold inventory was 4.04 million in July 2007.

“A diminishing share of foreclosed property sales is helping home values. Moreover, an acute shortage of inventory in certain markets is leading to multiple biddings and escalating price conditions,” Yun said. He notes some areas with tight supply include the Washington, D.C., area; Miami; Naples, Fla.; North Dakota; Phoenix; Orange County, Calif.; and Seattle. “We expect stronger price increases in most of these areas.” (hide)

(Reuters) - China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury's first-ever direct relationship with a foreign government, according to documents viewed by Reuters. The relationship means the People's Bank of China buys U.S. debt using a different method than any other central bank in the world. The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.

China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn't been necessary.

The documents viewed by Reuters show the U.S. Treasury Department has given the People's Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.

China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market.

The change was not announced publicly or in any message to primary dealers.

"Direct bidding is open to a wide range of investors, but as a matter of general policy we do not comment on individual bidders," said Matt Anderson, a Treasury Department spokesman. (hide)

Officially, euro zone governments say they're not talking about a Greek exit from the euro zone. But it's a different story behind closed doors. Finance ministers meeting in Brussels last Monday threatened to evict Greece, SPIEGEL has learned. Meanwhile, Germany denied reports that Chancellor Angela Merkel called for Greece to hold a referendum on the euro.

Despite official claims to the contrary, the governments of the euro zone are threatening to kick Greece out of the currency union. At a meeting of euro-zone finance ministers last Monday in Brussels, it was made clear to Greek Finance Minister Filippos Sachinidis just how serious the situation had become.

"If we now held a secret vote about Greece staying in the euro zone," Euro Group Chairman Jean-Claude Juncker warned his Greek colleague, "there would be an overwhelming majority against it." Other participants in the meeting also had harsh words for Sachinidis, with particularly strong criticism towards Athens coming from Portugal and Ireland, countries that have also accepted bailouts in the crisis. (hide)