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.
