This morning, mortgage backed securities are just slightly in the green, and I think things are going to be choppy. Not a lot of data is being issued with the exception of today’s Fed announcement (which I guess could be termed “data.”). Any improvement that we’re seeing is likely a result of a flight to safety from the disaster that is Europe at the moment.
Click here to see our current mortgage rates.
Today’s Economic Data:
Not much today, but since we have space to fill, it’s worth discussing Greece and Europe for a bit. This is going to be a simplified explanation (I’m not an expert in the Eurozone), but here goes: As part of a bailout deal back in 2012, the European Central Bank, the IMF, and the European Commission imposed very severe austerity measures on Greece (the Germans, in particular, had a big hand in these austerity measures). the austerity measures caused widespread unemployment to become worse, and sent poverty levels soaring.
In response the Greek people elected new Prime Minister Alex Tsipras from the anti-austerity Syriza party (which is an acronym for “The Coalition of the Radical Left). Jacobin Magazine – yes I know, hardly an unbiased source – has a pretty good rundown of the party’s platform and what it could mean for Greece moving forward here.
Tsipras has already began fighting the austerity measures, remarking “We won’t get into a mutually destructive clash, but we will not continue a policy of subjection.” He has said that Greek will not default on its debts, but the markets don’t seem to be buying, and a Bloomberg article says that Greek credit-default swaps are signalling a 70 percent probability of some form of default in the next five years. Furthermore, there is a concern that this win will embolden leftists in some of the other countries where austerity has been imposed, particularly Spain, Italy, and Ireland. If Greece’s creditors blink, it may embolden the populist movements in these countries. A disorderly break-up of the Eurozone still seems pretty unlikely to me, but it’s a little more in play than it was before the weekend.
TL; DR: Greece’s rejection of austerity measures is roiling European debt markets, and we’re seeing a flight to the safety of U.S. bonds. This should be of benefit to mortgage rates.
Today’s Fed Meeting:
I don’t know that I can bring myself to recap this again. For more background, you could read yesterday’s blog, Tim Duy’s recent work, or Jon Hilsenrath’s preview. Long and short is that while there is some risk to rates today, I don’t think there will be much impact from the statement. If it is interpreted as being more dovish, we’ll benefit a little, and if it is more hawkish, rates will rise a bit in response. But I expect that this will be more of a “stay the course” type deal, and that the Fed is still balancing what to do in the face of global headwinds, inflation that is low and likely to be going lower, a stronger dollar, low oil prices, and weak wage gains. I don’t think we’ll glean much today. If there’s something of interest, perhaps I’ll write up something additional this afternoon.
This Week’s Scheduled Economic Data That Could Impact Mortgage Rates:
Monday:
- Greek election: Syriza wins – ultimate outcome very uncertain.
- Durable Good Orders: Headline expectation: 0.7 percent, actual, -3.4 percent. Core expectation: 0.8 percent, core actual: -0.8 percent.
- S&P/Case-Shiller Home Price Index for November: Expected seasonally adjusted month-over-month expectations: 0.6 percent. Actual: 0.7 percent.
- New Home Sales: Expectation: SAAR of 452k. Actual: 481k.
- Consumer Confidence: Expectation: 96, actual: 102.9.
- Fed meeting:
- Weekly Jobless Claims:
- Advance Estimate Q4 GDP:
- Chicago PMI:
- Consumer Sentiment:
