Bond markets continue to trade generally unchanged now for almost two months. The recent data on employment has been better than the Fed is believing, inflation while stubbornly higher than what the Fed wants isn’t increasing. Core consumer prices month/month +0.2%, unchanged from November, year/year +2.6% also unchanged. Yesterday weekly jobless claims were less than estimates confirming employment while not increasing isn’t worsening, continuing claims declined.
Now traders and markets wrestling with when, if, the Fed will cut rates. No cut in two weeks, that was a given, but with recent data on employment and inflation shows the current tide is changing with expectations of a March cut are fading.
Geopolitical issues in Iran and Venezuela are not filtering into US markets overall. The Iran situation is difficult for the President; there isn’t much the US can do. Unless there is a flare up in any of the global issues it won’t bother equities or interest rates. Focus will continue to be on US domestic conditions.
Once again, this morning the 10 year note banging up against the infamous 4.20% level that has held selling for the last six weeks.
At 9:15 am December industrial production and factory use. Production expected +0.1%, increased 0.4% the same as in November, capacity utilization a little better, expected 76.0%, increased to 76.3%.
At 9:30 am the DJIA opened +107, NASDAQ +108, S&P +20. 10 year note 4.19% +1 bp. FNMA 5.0 30 year coupon at 9:30 am -3 bps from yesterday’s close and -18 bp from 9:30 am yesterday.
At 10 am a few minutes ago, January NAHB hosing market index expected at 40 from 39 in December.
Monday is MLK, a federal holiday, all markets will be closed. No mail, most schools will be closed.
Absent fresh news on the geopolitical fronts today won’t see much movement in bonds.
PRICES @ 10:00 AM
10 year note: 4.19% +1 bp
5 year note: 3.79% +2 bp
2 year note: 3.58% unch
30 year bond: 4.81% +1 bp
30 year FNMA 5.0: @9:30 am 100.13 -3 bp (-18 bp from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 101.38 -4 bp (-10 bp from 9:30 am yesterday)
30 year GNMA 5.0: @9:30 am 99.94 +4 bp (-18 bp from 9:30 am yesterday)
Dollar/Yen: 158.00 -0.63 yen
Dollar/Euro: $1.1618 +$0.0009
Dollar Index: 99.26 -0.07
Gold: $4.611.50 -$12.20
Bitcoin: 95,310 +115
Crude Oil: $59.76 +$0.57
DJIA: 49,376 -66
NASDAQ: 23,582 +51
S&P 500: 6948 +3
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.
At 8:30 am ET weekly jobless claims were lower than forecasts at 198K claims against estimates of 212K, -9K from the previous week. Weekly claims the lowest in two years. Continuing claims fell by 19,000 to 1,884,000 at the turn of the year, in line with market expectations, to extend the decreasing trend since October. Based on comments from J Powell and a few other Fed officials employment was expected to worsen, so far not the case; same goes for inflation, while not slowing inflation is not increasing.
More old data; US import prices rose 0.1% year-over-year in November 2025, according to delayed data from the BLS. Figures for October were unavailable due to last fall’s US government shutdown. Export prices increased 0.5% over the two months through November 2025, after being unchanged in September.
The NY Empire State Manufacturing Index in the US jumped to 7.7 from a revised -3.7 in December, beating forecasts of 1. The reading showed business activity in New York state rose modestly, as new orders increased, and shipments grew at a solid pace.
January Philadelphia Fed business index expected -3, from -8.8 in December jumped to +12.6, the highest since last September.
At 9:30 am the DJIA opened +191, NASDAQ +199, S&P +42. 10 year 4.14% unchanged. FNMA 5.0 30 year coupon at 9:30 am +4 bps from yesterday’s close and +10 bps from 9:30 am yesterday.
All scheduled data today is out, any significant news from the White House, Congress though the rest of the day will nudge traders, otherwise it will be another quiet session.
10 year note: 4.15% +1 bp
5 year note: 3.75% +4 bp
2 year note: 3.55% +3 bp
30 year bond: 4.78% unch
30 year FNMA 5.0: @9:30 am 100.31 +4 bp (+10 bps from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 101.48 +4 bp (+10 bps from 9:30 am yesterday)
30 year GNMA 5.0: @9:30 am 100.12 +1 bp (+6 bps from 9:30 am yesterday)
Dollar/Yen: 158.79 +0.33 yen
Dollar/Euro: $1.1598 -$0.0047
Dollar Index: 99.41 +0.28
Gold: $4,609.80 -$25.90
Bitcoin: 95,842 -1824
Crude Oil: $59.09 -$2.93 (less Iran concerns)
DJIA: 49,310 +161
NASDAQ: 23,656 +185
S&P 500: 6964 +37
Markets began quietly this morning.
MBA reported mortgage applications heated up last week. Mortgage applications in the US surged by 28.5% from the previous week in the second full week of January, rebounding from three consecutive periods of declines. Mortgage applications surged by 28.5% from the previous week in the second full week of January. It was the sharpest increase since September as mortgage rates are at the lowest level in 15 month. Applications for contracts to refinance a mortgage, which are sensitive to short-term changes, surged by 40% from the previous week. Applications for a mortgage to purchase a home rose by 16.9%.
Some inflation data still lags, this morning the November producer price index. Month/month overall PPI expected +0.3% released at +0.2%, year/year though thought to be +2.7% increased 3.0%. The core, ex food and energy, +0.2% up from 0.1% in October; year/year core increased from +2.6% in October to 3.0%.
Another lagging data point, November retail sales. Month/month estimates +0.2%, increased 0.6%, ex vehicles forecasts +0.3%, increased 0.5%. The largest increases were in sales for sporting goods, hobby, musical instrument, & book stores (1.9%); miscellaneous store retailers (1.7%); gasoline stations (1.4%); building material and garden equipment suppliers (1.3%); motor vehicle & parts dealers (1%); clothing stores (0.9%); food services & drinking places (0.6%); non-store retailers (0.4%); health & personal care stores (0.3%); and food & beverage stores (0.1%). On the other hand, sales were flat at general merchandise and electronics & appliance stores and fell 0.1% at furniture stores. Meanwhile, sales excluding food services, auto dealers, building materials stores and gasoline stations, which are used to calculate GDP, rose 0.4%, following a 0.6% gain in October, in line with expectations.
The Q3 current account narrowed by $22.8B, or 9.2%, to $226.4B in the third quarter of 2025, more than market expectations of a $238B deficit. The primary account swung to a surplus of $5.2B from a deficit of $5.8B and the secondary income deficit narrowed slightly to $53.5B from $53.6B.
At 9:30 am the DJIA opened -15, NASDAQ -163, S&P -30. 10 year at 9:30 am 4.16% -2 bps. FNMA 5.0 30 year coupon at 9:30 am +9 bps from yesterday’s close and +5 bps from 9:30 am yesterday.
At 10 am December existing home sales, estimates at 4.230 million, hit at 4.35 million, +5.1%, year/year +1.4%.
This afternoon at 2 pm the Fed will release its Beige Book, details from the 12 Fed districts.
10 year note: 4.18% -1 bp
5 year note: 3.72% -2 bp
2 year note: 3.47% -1 bp
30 year bond: 4.87% unch
30 year FNMA 5.0: @9:30 am 99.69% +5 bp (-10 bp from 9:30 am Friday)
30 year FNMA 5.5: @9:30 am 101.43 +5 bp (-6 bp from 9:30 am Friday)
30 year GNMA 5.0: @9:30 am 99.73 +5 bp (-8 bp from 9:30 am Friday)
Dollar/Yen: 156.76 -0.07 yen
Dollar/Euro: $1.1683 -$0.0038
Dollar Index: 98.69 +0.27
Gold: $4,434.70 +$105.40 (safety move)
Bitcoin: 93,265 +1994
Crude Oil: $58.05 +$0.73
DJIA: 48,922 +553
NASDAQ: 23,401 +166
S&P 500: 6898 +40
December consumer prices (CPI) released at 8:30 am ET this morning. There were no CPI inflation reports for October and November and there will not be, due to the shutdown. Month/month overall inflation increased 0.3% as expected, year/year overall +2.7% with forecasts of +2.6%. The core (ex-food and energy) expected +0.3%, reported +0.2%; year/year +2.6% with estimates at +2.7%. Inflation remains above what the Fed would like at 2.0% but inflation isn’t increasing either. Shelter, a key element, increased 0.4%, which was the biggest item for the monthly increase. The shelter accounts for more than one-third of the CPI weighting and was up 3.2% on an annual basis. Food prices jumped 0.7% for the month. The takeaway is that core inflation, the Fed’s prime focus, clocked in a little lower.
Prior to the 8:30 am release the 10 traded at 4.20% +2 bps from yesterday, there was a little bounce on the report pushing the note to 4.16% although it didn’t hold and scooted back to unchanged at 4.18%: MBS prices at 9 am -3 bps from yesterday’s close.
A month ago ADP announced a revision on how it reports private jobs. According to the release today, private employers added an average of 11,750 jobs per week in the four weeks ending December 20, 2025, up from an average gain of 11,000 in the prior period. This marked the fifth consecutive period of job growth and the strongest pace since late November, with hiring continuing to remain firmly in positive territory, according to ADP Research.
Early this morning NFIB released its small business optimism index for December, expected at 99.4 reported at 99.5 up from 99.0 in November.
At 9:30 am the DJIA opened -20, NASDAQ -9, S&P +1. 10 year 4.17% -1 bp. FNMA 5.0 30 year coupon at 9:30 am +1 bp from yesterday’s close and -20 bps from 9:30 am yesterday.
At 10 am October new home sales thought to be 714K increased to 737K.
At 1 pm Treasury will auction $22B of 30 year bonds; yesterday’s 10 year auction saw decent bidding.
At 2 pm Treasury will release the December budget; estimates are the monthly deficit at -$152.5B down from -$173.3B in November.
10 year note: 4.17% -1 bp
5 year note: 3.75% -1 bp
2 year note: 3.54% unch
30 year bond: 4.83% unch
30 year FNMA 5.0: @9:30 am 100.17 +1 bp (-20 bp from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 101.37 -2 bp (-15 bp from 9:30 am yesterday)
30 year GNMA 5.0: @9:30 am 100.02 -5 bp (-15 bp from 9:30 am yesterday)
Dollar/Yen: 158.97 +0.80 yen
Dollar/Euro: $1.1661 -$0.0006
Dollar Index: 98.97 +0.11
Gold: $4,622.90 +$8.20
Bitcoin: 92,601 +1192
Crude Oil: $60.60 +$1.10
DJIA: 49,328 -262
NASDAQ: 23,744 +10
S&P 500: 6973 -5
Neutral
Hiring hibernation meets wage growth
"It's tough to make predictions, especially about the future,” was one of those lines baseball character Yogi Berra made famous. That somewhat goofy sounding wisdom feels particularly applicable when looking at December's employment numbers, which paints a picture that's simultaneously concerning and encouraging, depending on which data point hits you hardest.
According to Realtor.com's Jake Krimmel, the final jobs report of 2025 delivered exactly the kind of contradictory snapshot that makes economists reach for a bottle of aspirin. Payroll growth limped in at just 50,000 new positions, well below expectations and a clear signal that hiring enthusiasm remains nothing more than tepid. The private sector contributed a measly 37,000 jobs while government employment added 13,000, and previous months saw downward revisions only complicated further by lingering shutdown-related complications.
But wait. There’s more. Because here’s where things get interesting. While hiring slowed to a crawl, the unemployment rate actually dropped from November's worrying 4.6% (later revised to 4.5%) down to 4.4%, or more precisely, 4.38% before rounding. Meanwhile, wages showed some muscle, climbing 3.8% year over year. What emerges is a portrait of what Krimmel calls a "low-hire, low-fire" labor market — one that's neither collapsing nor exactly thriving as we head into 2026.
For the Federal Reserve, this mixed bag essentially slams the door on a much-hoped-for January rate cut. The falling unemployment rate combined with solid wage growth removes any sense of urgency to adjust rates downward, despite the anemic hiring numbers. With inflation and real earnings data still pending next week, the Fed will almost certainly maintain its wait-and-see posture unless inflation figures come in shockingly low.
Housing market implications are nuanced but lean positive as mortgage rates found their footing in recent weeks. Krimmel reminds us that housing demand ultimately rests on not just the anticipation of rate cuts, but labor market stability and real income growth as well. The uptick in real wage growth as 2025 ended represents genuinely good news for workers and would-be homebuyers, even as affordability challenges continue casting shadows over activity levels.
According to Realtor’s December housing data, the market finished 2025 quietly and unevenly across different regions. Looking toward 2026, a more stable labor market with reduced downside risks should bolster household confidence and encourage first-time buyers, particularly as housing affordability has at last become an administration priority.
Realtor, TBWS
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are moving sideways today. The MBS market improved by +31 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Neutral
These are the three areas that have the greatest ability to impact rates this week. 1) Geopolitical, 2) Inflation and 3) The Fed.
1) Geopolitical: We saw huge upward swings last week due to geopolitical events. The long bond market will continue to be very sensitive to this area.
2) Inflation: We will get CPI on Tuesday and PPI twice (two months worth) on Wednesday.
3) The Fed: At the end of this week, the Fed will enter their media blackout period leading into the January FOMC Meeting. We will hear from a ton of speakers this week and get the Fed's Beige Book.
Treasury Auction: Here is this week's Treasury auction schedule.
01/12 3YR Note
01/12 10YR Note
01/13 30YR Bond
This Week's Potential Volatility: High
This morning markets are moving sideways. Volatility has started at moderate to high levels and could easily become high later in the week.
Bottom Line:
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Over the weekend DOJ opened investigation into Jerome Powell and the Fed over huge cost overruns for the Federal Reserve building renovations. The Fed’s independence back in focus, it stirs up juices of traders and investors, the DJIA in futures trading down 300 points. The Fed is the morning headline, but the more concerning news isn’t the Fed, its the President’s proposal for a one year cut on credit card rates to 10% to help consumers. US bank stocks getting hit hard this morning. This week starts the earnings season with the big banks reporting. Capping credit card rates will shut off credit for those with low credit scores.
Today Treasury will auction $58B of 3 year notes at 1 pm ET and $39B of 10 year notes.
Tomorrow December CPI inflation; overall month/month +0.3% from +0.2%, year/year 2.6% down from 2.7% in November. Core month/month +0.3% from +0.2%, year/year core 2.7% from 2.6%; inflation a slight bit higher. Treasury will auction $22B of 30 year bonds, Treasury will report its monthly statement expected at -$155B but better than November’s -$173.3B. ADP will report its weekly jobs data, estimates are private employers added an average of 11,500 jobs per week in the four weeks ending December 6, 2025, following an upwardly revised average gain of 17,500 jobs in the previous period.
Wednesday November PPI, month/month +0.3%, year/year +2.7% unchanged from October, month/month core +0.2% from +0.1%; December existing home sales (4.230 mil); Fed beige Book.
Thursday weekly jobless claims (212K from 208K), December retail sales, +0.5% ex-vehicles +0.4%, November import and export prices, imports +0.1% month/month, exports +0.1% month/month.
Friday December industrial production and capacity utilization (production +0.1%, cap utilization 76.0% unch from November. January NAHB housing market index (40 from 39).
10 year note: 4.19% +2 bp (high this morning 4.21%)
5 year note: 3.77% +1 bp
2 year note: 3.55% +2 bp
30 year bond: 4.85% +3 bp
30 year FNMA 5.0: @9:30 am 100.37 +4 bp (+7 bp from 9:30 am Friday)
30 year FNMA 5.5: @9:30 am 101.52 +1 bp (-18 bp from 9:30 am Friday)
30 year GNMA 5.0: @9:30 am 100.27 +7 bp (+10 bp from 9:30 am Friday)
Dollar/Yen: 157.98 -0.11 yen
Dollar/Euro: $1.1678 +$0.0043
Dollar Index: 98.85 -0.20
Gold: $4,606.40 +$105.50 (safety move on DOJ of the Federal Reserve)
Bitcoin: 90.846 +271
Crude Oil: $58.84 -$0.34
DJIA: 49,338 -166
NASDAQ: 23,664 -7
S&P 500: 6962 -4
The final report on jobs this morning, the December BLS employment report. The US economy added 50K payrolls in December, less than a downwardly revised 56K (originally 64K) in November and below forecasts of 60K. The change in total nonfarm payroll employment for October was revised down by 68K to -173K and the change for November was revised down by 8K to +56K. With these revisions, employment in October and November combined is 76K lower than previously reported. Average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.3%, over a month to $37.02 in December 2025, after an upwardly revised 0.2% increase in November, matching market forecasts. Over the past 12 months, average hourly earnings have increased by 3.8% in December, following an upwardly revised 3.6% advance in November and surpassing market estimates of a 3.6% rise. Less jobs than thought but the unemployment declined implying less workers, confirmed by the labor participation rates declining from 62.5% to 62.4%.
The reaction to the employment report in the treasury markets wasn’t much, the 10 year note hit 4.20% then backed down to 4.18% unchanged from yesterday before going back to 4.20% at 10 am.
The President announced yesterday that he is directing Fannie Mae and Freddie Mac to purchase $200B in mortgage-backed securities (MBS) in an effort to lower mortgage rates and make homeownership more affordable. The purchase will be funded by the liquidity on Fannie Mae and Freddie Mac's balance sheets, not by the Federal Reserve or Treasury Department.
At 10 am the University of Michigan mid-month consumer sentiment index is better than December.
10 year note: 4.20% +2 bp
5 year note: 3.76% +2 bp
2 year note: 3.52% +3 bp
30 year bond: 4.86% +2 bp
30 year FNMA 5.0: @9:30 am 100.30 +18 bp (+59 bp from 9:30 am yesterday ???)
30 year FNMA 5.5: @9:30 am 101.70 +30 bp (+28 bp from 9:30 am yesterday ???)
30 year GNMA 5.0: @9:30 am 100.17 +38 bp (+37 bp from 9:30 am yesterday ???)
Dollar/Yen: 157.96 +1.08 yen
Dollar/Euro: $1.1637 -$0.0024
Dollar Index: 99.08 +0.15
Gold: $4,506.10 +$45.40
Bitcoin: 90,319-528
Crude Oil: $59.06 +$1.30
DJIA: 49,355 +89
NASDAQ: 23,512 +32
S&P 500: 6940 +18
Weekly jobless claims at 8:30 am ET this morning were generally in line with forecasts, claims increased 8K from the previous week to 208K with expectations at 208K. Claims are below the average through the previous year. Continuing jobless claims rose by 56K to 1.914 million two weeks ago, above market expectations of 1.900 million. More evidence that the US labor market has a slow pace of hiring against a steady level of firing. The 4 week average of claims 211.75K. Yesterday December ADP jobs were softer than estimates driving the key 10 year note down 4 bps to 4.13%, two hours later the November JOLTS job openings were less than estimates erasing much of the gain from ADP.
The reaction to the claims this morning increasing the 10 yield up 2 bps from yesterday’s close and MBS prices traded down 14 bps.
Q3 2025 productivity expected at +3.6% increased +4.9%; unit labor costs expected +0.8%, declined 1.9%. More evidence that inflation isn’t heating up.
October 2025 US trade deficit thought to be -$59.1B, reported at -$29.4B; September revised from -$52.8B to -$48.1B.
At 9:30 am the DJIA opened -110, NASDAQ -60, S&P -9. 10 year 4.18% +2 bps. FNMA 5.0 30 year price -14 bps from yesterday’s close and -19 bps from 9:30 am yesterday.
Tomorrow the December employment report will set the table on whether the key 10 year can hold 4.20%. The economy is hanging in, inflation isn’t escalating (or declining), employment weakening but so far it too is holding better than anticipated.
Trump trying to help the housing sector, he is planning to ban “large institutional investors” from buying single-family homes in an attempt to address spiraling housing costs. Will it help, some say not much.
10 year note: 4.18% +2 bp
5 year note: 3.74% +3 bp
2 year note: 3.49% +1 bp
30 year FNMA 5.0: @9:30 99.71 -14 bp (-19 bp from 9:30 yesterday)
30 year FNMA 5.5: @9:30 101.42 -9 bp (-11 bp from 9:30 yesterday)
30 year GNMA 5.0: @9:30 99.80 -13 bp (-14 bp from 9:30 yesterday)
Dollar/Yen: 157.05 +0.28 yen
Dollar/Euro: $1.1663 -$0.0013
Dollar Index: 98.90 +0.21
Gold: $4,437.50 -$25.00
Bitcoin: 89,481 -1470
Crude Oil: $57.12 +$1.14
DJIA: 49,040 +44
NASDAQ: 23,414 -170
S&P 500: 6908 -13