Rate update: Rates rise again as concern wanes

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By G. Steven Bray

If you only paid attention to the headlines today, you’d think Greece won a new bailout deal. It’s not that simple. The Greek parliament has to approve several austerity measures, including pension reforms and sales tax increases, by Wed to move the deal forward. The problem is these measures are harsher than the ones the Greek people rejected in the referendum a week ago. I’m not sure we’ve put this one in the rearview yet. If Greece balks at the measures, we’re looking at a default. If it doesn’t, Europe has kicked the Greek can down the road a little further.

Our other major source of uncertainty last week was the plunging Chinese stock market. The Chinese government implemented extraordinary measures, including a huge backstop of equity buying by the government. The measures seem to have plugged the hole in the dike. Whether the plug is temporary remains to be seen.

As we’ve discussed before, economic uncertainty is a friend to low interest rates. As uncertainty waned last week, interest rates drifted higher again. Absent economic concerns, the momentum in the market seems to be for higher rates. And I don’t see that changing soon without additional unexpected headlines.