OUTLOOK: Price Signal Summary - Monitoring Resistance In Bunds

Mortgage applications broadly stabilize as refis continue to slowly close the gap with new purchases. The more notable development is banks being increasingly willing to offer lower rates for jumbo mortgages. 

• MBA composite mortgage applications increased 3.1% last (sa) to reverse the -3.8% the week prior.  They’re back close to where they were in June after volatility in the first half of July before levelling off.
• New purchases applications continue their recent underperformance (1.5% after -5.8%) to refis (5.2% after -1.1%).
• Relative levels continue to tell a different story though, with composite applications at 54% of 2019 levels vs 61% for new purchases and 45% for refis.
• The 30Y conforming rate fell 6bps to 6.77% for its join lowest since early April.
• 30Y mortgage rate to 10Y swap rate spreads are at the low end of the 300 +/- 5bp range mostly seen since reciprocal tariffs were first detailed in early April, still wider than the 285bp averaged in Q1.
• 30Y jumbo mortgage rates traded further inside ahead, with the 30Y declining 9bps to 6.65% for the lowest since October. The regular to jumbo spread of 12bp is at its highest since Oct 2023 in a sign of some further loosening in conditions. 

Kathimerini reports that the gov't of PM Kyriakos Mitsotakis is already considering the scenario of two general elections being required in 2027 to boost the incumbent conservative New Democracy (ND)'s chances of winning an overall majority in the Hellenic Parliament. Under the current electoral system, the party winning the most seats wins an immediate 20-seat bonus as well as an additional seat for every half-percentage point of support between 25% and 40% of the nationwide vote. Nevertheless, with ND's support hovering around 30% (down from 40% in the June 2023 election), the prospect of retaining an overall majority is slim. 

• Kathimerini reports that, according to its sources, a first election would see ND support decline as voters let out their frustration with the party's two terms in power. There would then be an interim period with no clear gov't and the risk of sustained political instability. A second election would then be called, with the ND anticipating a return of voters unnerved by the prospect of a lengthy period without a gov't in place.  
• There are a number of recent examples of two elections taking place in quick succession. Indeed, in 2023, ND lost its majority in the May election, only to recover it in June under a new electoral system (outlined above). 

Chart 1. General Election Opinion Polling, % and 6-Poll Moving Average

Source: GPO, Prorata, Real Polls, Opinion Poll, Pulse, Metron Analysis, Interview, MRB, Alco, Marc, Palmos Analysis, MNI

The Kathimerini report claims there are also discussions over whether the electoral system could be changed to raise the electoral threshold from 3% to 5%. With several parties around 3% support but consistently below 5% (the far-right NIKI and Voice of Reason, left-wing New Left and MeRA25, and centrist Movement for Democracy), such a change would boost the seat totals of the larger parties and raise the chances of an ND majority second time around.

• The next election is not due until 2027 at the latest, but the report claims the gov't sees the upcoming Thessaloniki International Fair (TIF), running 6-14 Sep, as the most crucial of the administration. It is at the TIF opening that the PM historically announces the gov't programme for the next 12 months, with Mitsotakis and his party looking to bolster their lead over the centre-left PASOK and far-left Course of Freedom well ahead of the next election.