Mortgage rates are priced slightly worse this morning.
With no new economic data out today attention continues to focus on Europe and Washington DC.
A lack of details regarding the announced deal between European leaders yesterday has helped rates recover from sharper increases yesterday afternoon. As a reminder, one of the reasons that US interest rates are so low right now is because there is a lot of perceived risk surrounding Euro-zone countries. That drives demand for US-denominated debt securities, a phenomena called “flight-to-safety”, which pushes rates lower. If the EU produces a credible plan to prevent the spread of debt problems it would reverse this trend and US rates would likely notch higher.
In the long-run I still have my doubts about the fiscal stability of Greece. There current debt load is around 150% of GDP which history has shown is an unsustainable level. If/ when they do approach default I expect interest rates here in the US to improve (maybe not from current levels though).
Meanwhile, US lawmakers continue to negotiate on a debt reduction plan. Whether or not we get a meaningful long-term plan or a band-aid remains to be seen. I still believe there is a less than 1% chance the US defaults.
Current Outlook: neutral