Markets are slightly positive this morning as analysts and investors alike await news from Italy and Greece that new leaders will soon take the helm of these troubled ships of state. For mortgage rates it really is a wait and see situation—but a wait and see at really attractive mortgage rates. Mortgage rates will likely remain very close to current levels with the bellwether 30 Year Fixed-rate mortgage near 4%.
In Greece this morning there is the expectation that a new Prime Minister will be named. The name at the top of the list is Lucas Papademos, a former vice-president of the European Central Bank. Until this weekend Mr. Papademos had been in the US as a visiting professor at Harvard University. He is considered an attractive candidate because he is not a politician; he has no investment in the current policies, and who would, theoretically at least, not want to run for re-election.
In Italy a parliamentary vote this morning on public finance is considered an clear indicator of the fate of Prime Minister Silvio Berlusconi’s government. Even if the vote passes, opposition leaders have stated publically that they will call for a no-confidence vote immediately. More significantly, the leader of the so-called “northern alliance” Umberto Bossi, Berlusconi’s closet ally has called upon the Prime Minister to resign making his departure virtually assured.
Markets may react positively initially to the changes at the top in Greece and Italy, perhaps pushing rates slightly higher. However, as the difficult path that lies ahead for both new leaders becomes clear, I expect markets to cool and mortgage rates to return close to current levels.
In the US we have no official economic data released today. Perhaps the most significant US data is the earnings report from McDonalds. This fast-food behemoth reported extremely strong sales for the past quarter indicating an improving move among consumers. Particularly strong were sales of their coffee and smoothie beverages which are premium-priced relative to their traditional menu. This may very well be interpreted as another sign that the US economy is improving and could contribute to slightly higher mortgage rates today.
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