Mortgage rates are unchanged this morning.
The ongoing Greek debt saga continues to take center-stage. Over the weekend a group of French Banks that hold Greek government debt proposed to reinvest half of their proceeds from maturing bonds in an effort to help the country avoid default. This is a positive step but attention is now focused on the Greek Parliament which will vote on additional spending cuts this week. The additional austerity measures are necessary for Greece to receive additional aid and avoid default….for now.
Here in the US the Commerce Department released data showing that personal spending declined last month on an inflation adjusted basis. This is further evidence that the economic recovery has weakened. The underlying Personal Consumption Expenditure (PCE) price index also picked up thanks to higher food & energy prices. When you exclude volatile food & energy prices the so-called “core” PCE was up 1.2% on a year-over-year basis. Inflation is the primary driver of mortgage rates so we’re curious to see if higher commodity prices will show up in higher prices for other goods.
The US Treasury will auction $99 billion in fixed income securities this week beginning with $35 billion in 2-year notes today. Click HERE to understand how government borrowing can impact mortgage rates.
Lastly, the Fed’s controversial QE2 program winds down this week and some analysts believe interest rates will rise when the Fed exits the marketplace. However, the markets typically anticipate this type of news so I don’t expect rates to suddenly jump higher.
Current Outlook: neutral