Mortgage rates were somewhat higher today as politicians struck a more conciliatory tone in Italy.  To be clear, we are indeed talking about mortgage rates in the United States in relation to European politics.  It's not the first time and it likely won't be the last.

The European Union is massive in terms of the size of its economy and its impacts on the global financial system.  Threats to the stability of the EU cause shockwaves in financial markets.  Those shockwaves have an impact on everything from stock prices to mortgage rates. 

The latest threat is Italy's would-be government: a coalition between 2 parties that are both less than enthusiastic about Italy remaining in the EU.  They drafted a lawmaking gameplan 2 weeks ago, and while it didn't include any specific goals regarding the country's EU membership, one of their nominees is a vocal proponent of a Brexit-style departure for Italy.

Yesterday's surge toward lower rates occurred because the Italian President vetoed that nomination.  At first glance, that might seem like good news because it keeps the guy who wants to leave the EU out of office.  The unintentional consequence is that new elections would have to be held and those elections would likely evolve into a referendum on Italy's membership in the EU.

Today saw the political tone move in a more moderate direction, with key players on both sides expressing some willingness to sort things out and try to avoid snap elections.  This does more than anything defuse the sorts of risks that helped rates yesterday.  In short, that's why rates moved higher today.  To whatever extent the conciliatory tone grows, rates could continue higher.