01/09/2026
Interest rates have been range bound since early December, oscillating between 4.10% and 4.20% on the 10-year treasury.
Yesterday afternoon, President Trump suggested that Fannie and Freddie should and can buy up to $200B in MBS. This amount is ~15% of what the Fed purchased during covid, so a return to 3% is unlikely. The initial result has been an increase in price for note rates that fall into the 5.0 coupon and below and a decrease in price for note rates that fall into the 6.0 coupon and above. The 5.5 coupon note rotes initially saw a rally in price but have since reversed a majority of those gains – which leaves our production note rates largely unchanged.
This morning, the BLS delivered a Goldilocks jobs report – 50k new jobs vs expectations of 56k. Not too many jobs to lead the Fed to believe we don’t need rate cuts and not too few jobs to lead the market to believe the economy is in grave danger. Perfection, 10/10, no notes. Cherry on top – the unemployment rate ticked down to 4.4% from a downwardly revised 4.5% (from 4.6%) in November.
With Jobs in the rearview, the market will now look forward to the ensuing inflation data hitting the tape next week – CPI Tuesday and PPI Wednesday – to give the Fed more clarity on the direction of interest rates. As things stand currently, market expectations are for no rate cuts in January and two rate cuts total in 2026. The first coming mid summer and the second mid fall.
