The Greek government was successful in passing a vote to accept the austerity bill that paves the way for a third bailout. Next, the parliaments of several other European countries will vote on the bailout plan later this week. Pending no disruption to the process, the massive bailout should happen. Given that the US stock and bond market should already have this priced in to their markets, there should be very little impact to mortgage rates after the agreement is finalized. However, the markets have been incredibly volatile around the topic of Greece, so anything can happen.
Tomorrow we will receive an update on the Consumer Price Index (CPI). Given that this is a report that measures inflation on a consumer level, the market’s reaction to the report will be exaggerated. Given that the year over year number will be subtracting the very tame reading of +0.1% from June of 2014; any reading over this level will increase the annual rate of growth. Given the recent indicators point to a likelihood of inflation heating up, we anticipate a higher reading in 2015 than we saw back in 2014. Therefore, we expect the market to act negatively based on the headline reports stating that inflation is heating up.
In light of tomorrow’s CPI report, the risk of floating is elevated. We suggest locking ahead of tomorrow’s significant announcement to avoid the likely volatility associated with an increase in the year over year reading.