When the administration announced that Fannie and Freddie would be buying mortgage-backed securities in early January, rates fell sharply to the lowest levels in more than 3 years. After a moderate rebound the following week, we’ve been holding mostly steady in a range that was 0.1-0.2 above those long-term lows. The past two days have brought enough improvement that the average lender is once again at levels that are close enough to the long-term lows seen on January 9th and 12th. What accounts for the strength? In today’s case, incremental gains were driven by a tame reading in January’s Consumer Price Index (CPI), a key inflation report. In general, lower inflation coincides with lower rates, and today’s reading was slightly lower than expected. 

Existing-home sales pulled back sharply in January, quickly dashing any hopes that December’s year-end rebound brought, as harsh winter weather and still-tight supply conditions weighed on activity. Sales fell 8.4% to a seasonally adjusted annual rate of 3.91 million, the lowest levels since November 2024. According to the National Association of Realtors (NAR), transactions were also 4.4% lower than the same time last year, with every region posting both month-over-month and year-over-year declines. “The decrease in sales is disappointing,” said NAR Chief Economist Lawrence Yun. Perhaps an understatement, especially after the strong showing last month. He added that affordability is nevertheless improving, with wage gains outpacing price growth and mortgage rates running lower than a year ago, though supply remains limited. Inventory dipped slightly from December but stayed above year-ago levels. Total housing inventory registered at 1.22 million units, down 0.8% from the prior month and up 3.4% from January 2025. The months’ supply of unsold homes increased to 3.7 months, up from 3.5 months in December. Price pressures persisted. The median existing-home price for all housing types rose to $396,800, up 0.9% from a year earlier and marking the 31st consecutive month of annual gains. Yun noted that homeowners continue to build substantial equity, estimating that the typical owner has accumulated more than $130,000 in housing wealth since early 2020.

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CPI came in just a hair below forecasts at the headline level and right in line with forecasts at the core level (unrounded .295 vs .300). Shelter components continued lower with Owners’ Equivalent Rent at 0.220 (basically a cycle low if we ignore the low quality data collection surrounding the government shutdown). The only potential hurdle for the bond market to clear was the surge in the supercore reading to the highest levels in a year. Despite a fair amount of attention paid to supercore in 2025, bonds seem willing to look past this development today, perhaps concluding that it’s more important for housing-related metrics to continue their decline. 10yr yields are adding to this week’s rally, down about 3bps at 4.07 an hour after the data.

Unison faces allegations it operates as an unlicensed mortgage lender with misleading marketing that drives homeowners into high-risk “no-debt” contracts.

The 30-year fixed-rate mortgage averaged 6.09% Thursday, down two basis points from last week, while the 15-year rate fell to 5.44%, according to Freddie Mac.

A House subcommittee hearing discussing the future of the government-sponsored enterprises, noted both are still severely undercapitalized.

The company formerly known as Ocwen confirmed that a deferred tax asset valuation helped boost net income to common shareholders despite servicing challenges.

Contract closings decreased 8.4%, the biggest drop since February 2022, to a 3.91 million annualized pace in January, according to National Association of Realtors data released Thursday.

Yields Magically and Mysteriously Sink to Lowest Levels in 2 Months.

At the 3pm CME close, 10yr yields were just over 4.10%–the lowest level since December 4th, 2025.  In light of yesterday’s stronger jobs report, today’s absence of market moving data, and this week’s Treasury auction cycle, it is impossible to account for these gains without conjecture and assumption. Certainly heavy selling in stocks and commodities deserves some credit for driving a flight to safety that benefited bonds, but we’ve definitely seen similar stock selling without the bond market benefit. Apart from that, the guesses get more tenuous as we’d have to rely on things that can’t be seen or measured. Friday’s CPI carries some volatility potential, but not in the same league as the jobs report.

Econ Data / Events

Continued Claims (Jan)/31

1,862K vs 1850K f’cast, 1844K prev

Jobless Claims (Feb)/07

227K vs 222K f’cast, 231K prev

Existing Home Sales

3.91m vs 4.18m f’cast, 4.27m prev

Market Movement Recap

08:37 AM No major reaction to jobless claims data. Modestly stronger overnight with 10yr down 2.1bps at 4.152 and MBS up 3 ticks (0.09). 

10:02 AM Best levels of the morning with MBS up an eighth and 10yr down 2.3bps at 4.15

11:29 AM Mini-snowball rally with help from stock losses. 10yr down 5.2bps at 4.121 and MBS up 7 ticks (.22)

01:04 PM 30yr bond auction 4.75 vs 4.771 expectations.  Bid to cover 2.66 vs 2.36 avg (higher is better).  
10yr yields down 6.1bps to new lows of 4.113. MBS up 8 ticks still. 

03:35 PM Best levels of the day. MBS up 9 ticks (.28) and 10yr down 7bps at 4.103