Mortgage rates improved considerably yesterday following the Italian election. There’s a fair amount of economic data today as well as a speech from Ben Bernanke, so there could be more volatility in store for today. Given the strength of yesterday’s rally, I would imagine that we will end up giving back some ground, but that’s going to be largely dependent upon the quality of the data.
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I’m no expert in European politics, so our discussion of the Italian election is going to be molto breve. Here’s the main takeaways: many Italians are tired of austerity measures and the havoc that they have wrought upon the Italian economy. As a result, yesterday’s election was split between the center-left party (Bersani), the center-right party (Berlusconi), and an upstart party headed by a guy (Grillo) referred to in the Financial Times as a “comedian-blogger.” Italy also has a very confusing electoral system (Reuters has a pretty good run-down of it here), and yesterday’s results could mean that no government coalition will be formed, and another election may be required.
So what does all this mean? Nobody really knows for sure, and that’s what is roiling the markets. Italy is the Eurozone’s third largest economy, and is vital to the future of the shared currency. There is the real possibility for a lot of friction between whatever Italian government ends up in power and the European Central Bank (which is imposing austerity as a condition of measures taken to prop up the Italian economy). All of the uncertainty surrounding this situation will probably help restrain interest rates.
Switching gears, the S&P/Case-Shiller Home Price Index saw home prices rise by 0.2% (not seasonally adjusted) from November to December for both the 10- and 20-city indices (NB: Case-Shiller is a three month moving average that is two months delayed.) The 10-city index is now up 5.9% year-over-year, while the 20-city index is up 6.8% in the same time frame. I still suspect that the home price gains seen recently are somewhat ephemeral, propped up by the Fed, large-scale investors, and an artificial restraint on supply. Still, this is a positive report, and will put upward pressure on rates.
Later this morning New Home Sales, Consumer Confidence, and the Richmond Fed Index will be released. Additionally, Ben Bernanke speaks at 10 am, and his comments will be closely watched to see if there are any signals about the future of QE. It’s going to be a bumpy ride for mortgage rates.
FT: Final Vote Results Confirm Italy Deadlock.
Guardian: Italian Political Deadlock Sends Markets Tumbling.
Tim Duy’s Fed Watch: ECB Should Pledge Not To Do Anything Stupid.
Wired: The AR-15 is More Than a Gun. It’s a Gadget. Wired has been putting out some really great journalism of late.
ProPublica: What Researchers Learned About Gun Violence Before Congress Killed Funding.
Tom Junod: Eleven Lives. On the BP oil spill.
Reuters: Justices Poised to Query Voting Rights Focus on South. Is this the worst Supreme Court we’ve ever had?
Marketwatch: Samsung Turning Up the Heat on Apple.
WSJ: Shiller’s Bottom Line: Risk Lingers in Housing.
Charlie Pierce: The Woodward Myth.
Talking Points Memo: Why Democrats are So Confident of a Sequestration Victory.
Kara Swisher: Despite Yahoo Ban, Most Tech Companies Support Work-From-Home for Employees.
The New Yorker: A Glimpse Inside Hezbollah.
Mental Floss: 9 Houses Built Just For Spite. Spite: my favorite motivator.
MSNBC: Robert Gibbs: I Was Told ‘Not Even To Acknowledge the Drone Program.” Most. Transparent. Administration. Ever.
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