The Daily Tearsheet

Stocks are higher as earnings continue to come in. Bonds and MBS are up.

Investment grade Corporate credit spreads hit a 27 year low in January, while junk bond spreads are at an 18 year low. Credit spreads represent the increased yield over risk-free debt that investors require. It is a measure of risk / reward and at the moment it seems investors are comfortable taking more risk for less reward.

For all the consternation in the media about a flight from the dollar, that the US will lose reserve currency status, Trump’s destruction of international norms, etc. we aren’t seeing much evidence of that in global appetite for US corporate debt. Part of it is due to the fact that on an inflation and yield basis the US dollar is in a lot better place than, say the Euro.

How does this affect the mortgage space? The most obvious one is non-QM, which has been seeing incredible growth over the past 5 years. Money is flooding into the space and it seems that every day I get a email from some new DSCR wholesaler looking for paper.

The market for non-QM remains robust despite fraud issues in Baltimore in Philly and the general carnage we are seeing in Florida. MBS spreads are still normal on a historical basis, so perhaps there is more room for tightening there.

Kansas City Fed President Jeff Schmid spoke yesterday about monetary policy and the different flavors of growth. Essentially if growth is being driven by capacity increases or productivity, that is much more robust than growth that is driven by a spike in demand without any corresponding increase in supply. Productivity growth in the third quarter of 2025 was higher than any quarter between 2010 and 2019. The low churn labor market (low hire / low fire) may increase productivity further as employees gain skills and become more efficient. That said, he is still hawkish:

The job of monetary policy is to keep inflation near 2% and the labor market at full employment. With demand outpacing supply and inflation running closer to 3% than 2%, I see it as appropriate to maintain a somewhat restrictive policy stance. Restrictive monetary policy can help slow demand growth, giving supply time to catch up and alleviate inflationary pressures.

With the cumulative rate cuts carried out since 2024, the federal funds rate is now well off its post-pandemic high and arguably no longer restraining activity all that much, if at all. As I’ve said before, I think it is best to judge whether interest rates are restrictive or accommodative based on how the economy performs. With growth showing momentum and inflation still hot, I’m not seeing many indications of economic restraint.

Mortgage credit increased in January according to the MBA. “Mortgage credit availability increased in January, as lenders broadened their offerings of ARM loans, cash out refinances, and loans on second homes. Most of these require lower LTV and higher credit scores,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The beginning of the year is typically when lenders start to position themselves for the spring homebuying pick up, and recent dips in mortgage rates have provided windows of refinance opportunities, including refinances into ARM loans. Jumbo credit availability expanded almost 3 percent over the month, with the growth in supply of both jumbo and non-QM loan programs.”

Stocks are higher this morning after a decent jobs report. Bonds and MBS are down.

The economy added 130,000 jobs in January, according to the BLS. November and December payrolls were revised downward by 17,000. The unemployment rate fell to 4.3%. Average hourly earnings rose 0.4% month-over-month and 3.7% YOY. Health care, social assistance and construction accounted for the majority of the job gains, while financial activities and government declined.

The number of employed people increased by 528k, while the number of unemployed people fell by 141k. Those not in the labor force fell by 221k. This pushed up the labor force participation rate and the employment-population ratio.

The initial reaction in the bond market was a 7 basis point spike in yields. A March rate cut is looking highly unlikely. The Employment Cost Index rose 0.7% on a quarterly basis and 3.4% YOY.

Dallas Fed President Laurie Logan said she is cautiously optimistic that if the labor market remains stable no further rate cuts are needed. “If so, this would tell me that our current policy stance is appropriate and no further rate cuts are needed to achieve our dual mandate goals,” Logan said in remarks prepared for delivery in Austin, Texas. If instead inflation falls but the labor market cools materially, “cutting rates again could become appropriate. But right now, I am more worried about inflation remaining stubbornly high.”

Mortgage applications fell 0.3% last week as purchases decreased 2% and refis rose 1%. “Mortgage applications were relatively flat over the week, but it was a mixed bag for the different loan types. The 30-year fixed rate was unchanged at 6.21 percent, and conventional applications declined for both purchases and refinances as borrowers held out for another drop in rates or shifted to other loan types,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “FHA purchase and refinance applications increased, helped partially by the FHA rate declining and remaining 20 basis points lower than the conforming 30-year fixed rate.”

Mortgage delinquencies declined 16 basis points last month, while foreclosure starts rose 54% (probably seasonality). Foreclosures are up 27% on a YOY basis, but still below pre-pandemic levels. Foreclosure activity is being driven primarily by FHA.

We are seeing refi activity pick up as mortgage rates move lower. If mortgage rates fall to 6.0%, 5.5 million borrowers are in the money for a refi. At 5.875% that number jumps to 6.5 million. We are on the cusp of a refi wave if rates cooperate.

Stocks are flattish this morning on no real news. Bonds and MBS are up.

Small business optimism fell slightly in January according to the NFIB Small Business Optimism Index. Most subindices were unchanged, however we saw some improved optimism about future sales. That said, the uncertainty index also rose, which is a negative for sentiment. Employment fell slightly, capital spending rose, and compensation rose. Prices are still elevated, although inflation moderated.

NFIB Chief Economist Bill Dunkelberg discussed the disconnect between the official GDP numbers and sentiment:

“According to the official statistics, the economy is performing well. GDP is rising smartly while inflation remains relatively low and stable, as does the unemployment rate. Focusing on GDP, the economy is flying. A 4.2% gain in the latest release (Q3 2025) suggests we are in the middle of a boom. But meanwhile, small business owners aren’t “feeling the gain,” or at least not at that level of economic growth.

The NFIB Small Business Optimism Index hovers just above its historical average. The new Employment Index tells a similar story, with numbers just above their historical average, suggesting a balanced labor market, not a booming one. The official statistics show one story of the economy and small businesses show a more moderated one.

The “confusion” stems from the details of what GDP really means. This includes consumer spending, government purchases of goods and services, and investment (the creation of new productive assets). For example, new data center construction is booming to support AI growth. As such, one sector could be taking off, while most of the economy is more balanced. Major investment-led growth of one sector is not necessarily shared, and especially not right away. Bottom line, GDP growth is strong, but not equally distributed across the economy. Let’s see if 2026 brings more balance to these trends.

Dunkelberg’s point about GDP and vibes is important. While left econ will focus on the K-shaped economy, I come back to the concept of “junk GDP.” GDP is consumption, government spending, investment and the trade balance. Some components impact the general mood more than others. Consumption is the biggest part of GDP and that is generally associated with good vibes. When consumers are feeling flush and spending money the economy feels good. While the latest GDP numbers have been strong, they have been driven primarily by the trade balance, which means higher exports and lower imports. These measures have limited impact on the typical US citizen.

Investment generally increases jobs, so that is another impactful component. Government spending has less of an impact. Finally even consumption isn’t uniform: increased consumption of discretionary goods are associated with good vibes, while increased consumption of non-discretionary goods (food, gasoline, etc.) is not.

Retail Sales for December were flat on a month-over-month basis and rose 2.4% YOY. This was below expectations. The retail sales number is not adjusted for inflation, so if you subtract off the inflation rate of ~ 3%, real retail sales were down on a YOY basis. Autos and home furnishings saw the biggest YOY decreases.

The December retail sales number should drag down GDP estimates for Q4. It will be interesting to see what numbers the retailers put up in a few weeks.

Stocks are higher this morning on no real news. Bonds and MBS are down small.

The week ahead will have some big data reports with the Employment Situation on Wednesday and the Consumer Price Index on Friday. We will also get retail sales and existing home sales. We will also get plenty of Fed speakers as well.

The Super Bowl was last night, and that means the Spring Selling Season is unofficially underway. Buyers are in a much better position than they have been in years, however affordability remains a constraint. NAR expects existing home sales to rise 14%, which would imply something like 4.6 million units. Much will depend on mortgage rates continuing to work their way downward.

Consumer confidence improved in February, according to the University of Michigan Consumer Sentiment Survey. Most of the increase was driven by the stock market. Given the recent sell-off, it probably is a case of easy come, easy go. Concerns about the labor market continue.

Year-ahead inflation expectations slipped from 4.0% to 3.5%. This is the lowest reading since January 2025. Long-term inflation expectations increased from 3.3% to 3.4%.

Bloomberg reported that the Trump Administration is considering an antitrust investigation into the homebuilders, which caused their stocks to fall on Friday. On the face of it, the concept that the big publicly-traded homebuilders have any sort of monopoly market power to set home prices is dubious at best. The latest pace for new home sales in 2025 was 737k, according to the October new home sales report. Pulte delivered just under 30k homes in 2025. D.R. Horton sold just under 85,000 and Lennar sold 82,000 homes. If you calculate the Herfindahls (a measure of market concentration) you will conclude the homebuilding market is highly fragmented, not concentrated. The antitrust attorneys at DOJ are probably thinking “you have 4 health insurers which control the entire US healthcare system and you are worrying about this?” Given that the antitrust angle is largely a farce, this is Trump putting pressure on the builders to do something about housing affordability.

Speaking of housing affordability, the House is expected to vote on a package to help ease affordability with higher loan limits for multifam, support for construction and rehab loans, along with some other measures. The program is bipartisan, so it should pass.

Cotality noticed an uptick in fraud risk in the fourth quarter of 2025. “The percentage of refinances in the Cotality data set has increased year-over-year by 19%, yet the Fraud Index is up 1.5% over that time. This is significant because historically, refis bring a much lower risk of fraud than purchases,” said Matt Seguin, Cotality Mortgage Fraud Solutions senior principal. “The two riskiest segments of the fraud index, investment properties (+34%) and multi-unit properties (50%), have jumped significantly over the last year as a portion of the overall application volume seen by Cotality. The increase in volume in these two segments has led to a slight increase in the Fraud Risk Index. This change seems to have been driven, at least partially, by the surge in popularity of the DSCR loans.”   

Given the issues we have seen in Baltimore and Philly lenders should take close look at appraisals and ensure that any big increases in appraised value are documented.

Stocks are rebounding after a tough week in the markets. Bonds and MBS are down small.

Job openings fell to 6.5 million at the end of the year, according to the JOLTS job openings report. This is down 386k from November and just under a million for 2025. Professional and business services saw the biggest decline, dropping about 360k on a YOY basis. Manufacturing was flat, despite fears about the tariffs. Education and health services also had a sizeable decline. The quits rate was flat at 2.0%.

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New Feature: Expanded Market Data with SOFR Swaps

You’ll notice our daily market data now includes SOFR swap rates, provided by Eris Innovations. These rates are derived from Eris SOFR Swap futures (native CME Group contracts), offering a transparent view of long-term rates.

Why this matters for your workflow: Since SOFR replaced LIBOR, it has become the universal benchmark for financing. Using SOFR swaps—rather than Treasuries—for modeling and hedging offers several advantages:

• Capital Efficiency: Swap futures require significantly less balance sheet than cash instruments.
• Precision Hedging: Liquid across the curve (out to 30 years), they allow you to isolate benchmark interest rate risk from credit spread exposure.
• Strategic Utility: Already widely used for hedging MSR portfolios, but they are also becoming the instrument of choice for hedging ARMs, non-QM, RTL, and key rate duration for Agency mortgage portfolios.

By benchmarking against SOFR, and easily trading this with Eris SOFR Swap futures, investors can more effectively monitor the “pure” credit spread of their mortgage assets, which can then be separately managed using Mortgage TBAs. Contact john.douglas@erisfutures.com to learn how Eris SOFR can help you improve your execution.

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Home price appreciation decelerated in January, according to the Clear Capital Home Data Index. The index declined 0.6% on a quarterly basis and rose only 1.7% on an annual basis. The Northeast was the only bright spot, with the South, Midwest and West showing quarterly declines. The New York City MSA took the top spot with prices rising 1.0% on a quarterly basis and 5.8% annually.

The laggards include a list of MSAs that were red-hot just a few years ago: Denver, Raleigh, Seattle, Nashville, etc. The hip-to-be-square trade continues.

Pennymac Financial Services stock got hammered on earnings last week, falling 38% over two days after releasing earnings. Production was up 10% on a YOY basis, lower than other companies but not terrible.

What was the issue with Pennymac? Prepays. The MSR portfolio exhibited higher than expected “realization of cash flows” which means loans were paying off faster than expected.

Mortgage companies had historically valued conventional mortgage servicing rights around 4 times the expected cash flow, however in the past few years, valuations have increased to the 5-6 range as companies accounted for potential recapture profits.

Recapture means what it sounds like – that if the company refinances its own MSR that potential p/l has some value. While Pennymac is complicated with its structure of two companies – PMT and PFSI – this stock behavior should serve as a shot across the bow for MSR valuations. If the loan prepays and you don’t get the refi, then a multiple over 5 simply doesn’t make sense.

Stocks are lower this morning as the “software as a selloff” trade continues. Bonds and MBS are up.

Job cuts surged in January, according to the Challenger, Gray and Christmas Job Cut report. Last month, nearly a quarter of a million job cuts were announced, which was the highest January since 2009. “Generally, we see a high number of job cuts in the first quarter, but this is a high total for January. It means most of these plans were set at the end of 2025, signaling employers are less-than-optimistic about the outlook for 2026,” said Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas.

Transportation was hit the hardest after a layoff announcement from UPS. Tech also was hit hard after layoff announcements from Amazon. Hiring plans were around 5,000 which was again the lowest since 2009.

Notwithstanding the January Challenger numbers, there continues to be a big difference between consumer confidence and the actual numbers in the labor market. The current consumer confidence numbers are at similar levels as the depths of the Great Recession, or the 1980-1981 recession, which was a doozy. If you look at the unemployment rate of 4.4%, an economist in the 1980s would have figured consumers would be jumping for joy.

After COVID, the negative correlation between the unemployment rate and consumer confidence broke down. The University of Michigan Consumer Sentiment Survey noted there is a big partisan breakdown – currently Republicans have a much more sanguine view of the economy than Democrats. They haven’t been tracking the partisan split for long, so it will be interesting to see if that dynamic flips once we get a Democrat in the White House.

I suspect the explanation lies in the fact we now live in media silos, where Team Blue media highlights all of the negative economic numbers while Team Red media highlights the positive ones. Unemployment is at 4.4%, Q3 GDP rose 4.4% in the fourth quarter, and the Atlanta Fed GDP Now index predicts GDP will grow at 4.2% in the first quarter.

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New Feature: Expanded Market Data with SOFR Swaps

You’ll notice our daily market data now includes SOFR swap rates, provided by Eris Innovations. These rates are derived from Eris SOFR Swap futures (native CME Group contracts), offering a transparent view of long-term rates.

Why this matters for your workflow: Since SOFR replaced LIBOR, it has become the universal benchmark for financing. Using SOFR swaps—rather than Treasuries—for modeling and hedging offers several advantages:

• Capital Efficiency: Swap futures require significantly less balance sheet than cash instruments.
• Precision Hedging: Liquid across the curve (out to 30 years), they allow you to isolate benchmark interest rate risk from credit spread exposure.
• Strategic Utility: Already widely used for hedging MSR portfolios, but they are also becoming the instrument of choice for hedging ARMs, non-QM, RTL, and key rate duration for Agency mortgage portfolios.

By benchmarking against SOFR, and easily trading this with Eris SOFR Swap futures, investors can more effectively monitor the “pure” credit spread of their mortgage assets, which can then be separately managed using Mortgage TBAs. Contact john.douglas@erisfutures.com to learn how Eris SOFR can help you improve your execution.

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Fed President Tom Barkin said he expected the US economy to remain resilient in 2026 and that productivity would continue to help in the fight against inflation. He compared the current boom in AI with the productivity boost we saw in the 1990s with the massive increase in PC capability and the early days of the Internet.

It was “a different question than the one we’re living with now,” with current inflation about a percentage point above target, not improving for the past year and the public contending with what is now a five-year inflation miss by the central bank, Barkin said.

“In their case, demand was quite strong … but inflation wasn’t. In our case, demand is not as strong, and inflation is higher. It is just a different conversation,” he said.

One of the biggest differences from the 1990s and today is that US was importing deflation as the Japanese economy collapsed. There is a possibility we could see a repeat of that with the Chinese economy as it wrestles with its own burst real estate bubble.

Stocks are flattish as earnings continue to come in. Bonds and MBS are up small.

The House reached a deal to re-open the government, which heads to Trump’s desk today to sign. The BLS has already delayed Friday’s jobs report, but hopefully the overall disruption will be small this time around. Yesterday’s JOLTS job openings report was delayed as well.

The deal funds most of the government through the remainder of the fiscal year, however the Department of Homeland Security only got two more weeks of funding. Democrats want to add more guardrails to immigration enforcement, so the negotiations on this aspect will continue.

The economy added 22,000 jobs in January according to the ADP Employment Report. This was below expectations and indicates that the labor market continues its low hiring / low firing mode. “Job creation took a step back in 2025, with private employers adding 398,000 jobs, down from 771,000 in 2024,” said Dr. Nela Richardson, chief economist, ADP. “While we’ve seen a continuous and dramatic slowdown in job creation for the past three years, wage growth has remained stable.”

We saw a sizeable jump in education / health services with 74,000 new jobs, however that was offset by a big decline in professional / business services, where 57,000 jobs were lost.

Compensation growth continues to moderate with pay increasing 4.5% for job stayers (unchanged) and falling to 6.4% from 6.6% for job changers.

______________________________________

New Feature: Expanded Market Data with SOFR Swaps

You’ll notice our daily market data now includes SOFR swap rates, provided by Eris Innovations. These rates are derived from Eris SOFR Swap futures (native CME Group contracts), offering a transparent view of long-term rates.

Why this matters for your workflow: Since SOFR replaced LIBOR, it has become the universal benchmark for financing. Using SOFR swaps—rather than Treasuries—for modeling and hedging offers several advantages:

• Capital Efficiency: Swap futures require significantly less balance sheet than cash instruments.
• Precision Hedging: Liquid across the curve (out to 30 years), they allow you to isolate benchmark interest rate risk from credit spread exposure.
• Strategic Utility: Already widely used for hedging MSR portfolios, but they are also becoming the instrument of choice for hedging ARMs, non-QM, RTL, and key rate duration for Agency mortgage portfolios.

By benchmarking against SOFR, and easily trading this with Eris SOFR Swap futures, investors can more effectively monitor the “pure” credit spread of their mortgage assets, which can then be separately managed using Mortgage TBAs. Contact john.douglas@erisfutures.com to learn how Eris SOFR can help you improve your execution.

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Mortgage applications fell 9% last week as refis fell 5% and purchases fell 14%. Weather probably had a significant impact. “Application volume was down last week, led by a 14% drop in purchase applications. Winter Storm Fern likely had an impact as much of the country was snowed in, hampering homebuying activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The annual increase in purchase applications was the weakest since April 2025. Refinance activity also decreased over the week, despite mortgage rates moving lower. The 30-year fixed rate averaged 6.21% last week, a slight decline, but not significant enough to incentivize more borrowers to refinance. Additionally, this week’s results are being compared to the week that included the MLK Jr. holiday.”

Private credit stocks like Blue Owl, KKR, TPG, Apollo have been getting crushed lately, which is something people in the mortgage business should watch. Blackrock TCP Capital Fund took a 19% writedown to net asset value last week and a lot of these funds have exposure to software companies.

While this doesn’t directly affect the mortgage business credit crises tend to spread and the area most likely to be affected is non-QM lending. With real estate prices flattening, average asking rents continuing to decline, overall suspicions about appraisal values there is the chance that the buy-side might pull back from the space.

Not saying this is imminent (they really are different spaces altogether) but credit problems can intensify and propagate to strange places.

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are down.

Friday’s jobs report will be delayed due to the partial government shutdown. “The Employment Situation release for January 2026 will not be released as scheduled on Friday, February 6, 2026. The release will be rescheduled upon the resumption of government funding,” Emily Liddel, associate commissioner of the BLS, said in a statement.

The Senate has passed a funding measure however it remains held up in the House. House Democrats want ICE reined in and are using the bill as leverage. Some Republicans are holding out because they want voter ID put into the bill.

The manufacturing economy expanded in January, according to the ISM Manufacturing Report. The index rose to 52.6 (any number over 50 indicates expansion) after 26 straight months of contraction. The number was higher than Wall Street analysts expected, driven by a huge jump in new orders. December saw a big decline in new orders, so the rebound may have been a “catch-up” phenomenon.

Inventory levels remain low, which is generally a good sign for the economy because it signals future production will be needed to meet demand. Prices also increased, which isn’t helpful for the Fed’s inflation-fighting mission. Employment is still in contraction mode as companies continue to manage headcount as opposed to hiring new workers.

The comments from manufacturers revolve around tariff uncertainty, however the rebound in the index is a good signal for the economy.

_____________________________________________

New Feature: Expanded Market Data with SOFR Swaps

You’ll notice our daily market data now includes SOFR swap rates, provided by Eris Innovations. These rates are derived from Eris SOFR Swap futures (native CME Group contracts), offering a transparent view of long-term rates.

Why this matters for your workflow: Since SOFR replaced LIBOR, it has become the universal benchmark for financing. Using SOFR swaps—rather than Treasuries—for modeling and hedging offers several advantages:

• Capital Efficiency: Swap futures require significantly less balance sheet than cash instruments.
• Precision Hedging: Liquid across the curve (out to 30 years), they allow you to isolate benchmark interest rate risk from credit spread exposure.
• Strategic Utility: Already widely used for hedging MSR portfolios, but they are also becoming the instrument of choice for hedging ARMs, non-QM, RTL, and key rate duration for Agency mortgage portfolios.

By benchmarking against SOFR, and easily trading this with Eris SOFR Swap futures, investors can more effectively monitor the “pure” credit spread of their mortgage assets, which can then be separately managed using Mortgage TBAs. Contact john.douglas@erisfutures.com to learn how Eris SOFR can help you improve your execution.

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US population growth slowed in 2025, according to the Census Bureau. The population grew at 0.5%, about half the growth rate of 2024. This was the lowest rate since 2021 when it grew at 0.2%. Immigration (or net migration to be more precise) was the driver of decrease as enforcement at the border resumed. We saw a similar decline during the first Trump Administration, followed by a bump during the Biden admin, and now net migration is falling again.

An under-appreciated driver of affordability is taxes and insurance (T&I) payments. For decades, the T&I aspect of the mortgage payment was more or less an afterthought as the principal and interest (P&I) portion accounted for the vast majority of the payment. No longer.

In Florida, escrow payment have risen 70% over the past 5 years, with T&I now accounting for 38% of the mortgage payment. On average, escrow payments have increased 45%, driven primarily by rising insurance costs.

“Escalating escrow costs are reshaping the financial reality of homeownership across the U.S.,” says Cotality Principal Economist Archana Pradhan. “This financial strain can deter many from entering the housing market, ultimately affecting their ability to achieve homeownership. At the same time, existing homeowners are getting squeezed, especially those who are on fixed incomes or tight budgets.”

Something to keep in mind when looking at payment-to-income ratios since rising costs can make a mortgage which looks affordable now unaffordable in a few years. This is also why you are seeing seniors flee Florida. It is no longer cheap and people on fixed income cannot handle the uncertainty of rising costs.

Stocks are lower this morning despite a sizeable drop in oil prices. Bonds and MBS are flat.

The week ahead will be dominated by the jobs report on Friday. We will also get ISM data and some Fed-speak.

The partial government shutdown began on Sunday morning, with the House expected to return today. House Democrats are demanding changes in immigration enforcement as a condition to back a resolution. The Senate already passed a plan on Friday to keep the government open, so this is limited to a few recalcitrant House Democrats. If there is a deal today, the brief shutdown probably won’t have any noticeable effects.

That said, there doesn’t appear to be the appetite for a prolonged shutdown like we had in the fall.

Precious metals had a wild ride on Friday, with silver losing 30% after a meteoric rise. Silver’s rise had nothing to do with naturals (i.e. industrial demand); it was completely driven by speculative activity driven by dollar bearishness.

Gold was also smacked around on Friday. The fun continues in the commodity markets as oil is down big this morning after Trump commented positively on the situation in Iran.

____________________________________________

New Feature: Expanded Market Data with SOFR Swaps

You’ll notice our daily market data now includes SOFR swap rates, provided by Eris Innovations. These rates are derived from Eris SOFR Swap futures (native CME Group contracts), offering a transparent view of long-term rates.

Why this matters for your workflow: Since SOFR replaced LIBOR, it has become the universal benchmark for financing. Using SOFR swaps—rather than Treasuries—for modeling and hedging offers several advantages:

• Capital Efficiency: Swap futures require significantly less balance sheet than cash instruments.
• Precision Hedging: Liquid across the curve (out to 30 years), they allow you to isolate benchmark interest rate risk from credit spread exposure.
• Strategic Utility: Already widely used for hedging MSR portfolios, but they are also becoming the instrument of choice for hedging ARMs, non-QM, RTL, and key rate duration for Agency mortgage portfolios.

By benchmarking against SOFR, and easily trading this with Eris SOFR Swap futures, investors can more effectively monitor the “pure” credit spread of their mortgage assets, which can then be separately managed using Mortgage TBAs. Contact john.douglas@erisfutures.com to learn how Eris SOFR can help you improve your execution.

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Fed Governor Michelle Bowman still considers monetary policy to be restrictive. “After excluding one-off tariff effects, and with unemployment near estimates of its natural rate but at risk of deteriorating, I continue to see policy as moderately restrictive,” she said.

She said she could have voted to reduce rates, and absent an improvement in the labor market, thinks the Fed should continue to move towards neutrality.

The Spring selling season unofficially kicks off this weekend, and buyers are in the best position in years. The typical buyer got a discount ended up buying the home at 7.9% below listing price, the best since 2012. Overall, most buyers got a 3.8% discount.

“Homebuyers in 2026 shouldn’t write off homes that are slightly above their budget because there’s a good chance they’ll get some sort of concession from the seller, be it a price cut, money toward closing costs or funds for repairs,” said Redin Senior Economist Asad Khan. “This marks a reversal from the pandemic homebuying frenzy, when house hunters were advised to search for homes below their budget because fierce bidding wars were causing properties to sell far above the asking price.”

Florida condos are seeing the biggest discounts, with West Palm seeing close to 11%.

Stocks are lower this morning on no real news. Bonds and MBS are flat.

Donald Trump has nominated Kevin Warsh to succeed Jerome Powell as Fed Chairman. “I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump said in a Truth Social post announcing the selection.

Warsh has previous experience at the Fed and is considered to be a safe choice for the markets. While he will probably support lowering rates, he is considered to be independent enough that he can resist Trump’s worst instincts.

Inflation at the wholesale level rose 0.5% month-over-month in December and rose 3.0% for 2025. This is an acceleration from the benign 0.1% and 0.2% increases in October and November. The increase was driven by final demand services, which was attributable to an increase in retailer and wholesaler margins.

____________________________________________

New Feature: Expanded Market Data with SOFR Swaps

You’ll notice our daily market data now includes SOFR swap rates, provided by Eris Innovations. These rates are derived from Eris SOFR Swap futures (native CME Group contracts), offering a transparent view of long-term rates.

Why this matters for your workflow: Since SOFR replaced LIBOR, it has become the universal benchmark for financing. Using SOFR swaps—rather than Treasuries—for modeling and hedging offers several advantages:

• Capital Efficiency: Swap futures require significantly less balance sheet than cash instruments.
• Precision Hedging: Liquid across the curve (out to 30 years), they allow you to isolate benchmark interest rate risk from credit spread exposure.
• Strategic Utility: Already widely used for hedging MSR portfolios, but they are also becoming the instrument of choice for hedging ARMs, non-QM, RTL, and key rate duration for Agency mortgage portfolios.

By benchmarking against SOFR, and easily trading this with Eris SOFR Swap futures, investors can more effectively monitor the “pure” credit spread of their mortgage assets, which can then be separately managed using Mortgage TBAs. Contact john.douglas@erisfutures.com to learn how Eris SOFR can help you improve your execution.

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The median rent in January fell 1.4% to $1,353, according to Apartment List. The vacancy rate hit 7.3%, which is a record high. “Early last year, it appeared that annual rent growth was on track to flip positive for the first time since mid-2023; however, that rebound stalled out and reversed course during a slow summer moving season that has now dragged into the winter,” wrote Chris Salviati, chief economist at Apartment List.

Multifamily units under construction have fallen back to prepandemic levels however there is still a decent amount of supply that has yet to hit the market.