Just one day after an incredibly strong jobs report–something that would normally create problematic upward momentum for rates–the average lender is back to the lowest levels since January 16th. At the risk of overusing a played-out metaphor, this was not on many experts’ bingo cards. Even with the benefit of hindsight, it’s not entirely possible to justify what we’ve seen over the past 2 days without jumping to conclusions and making educated guesses. Said guesses would rely on somewhat esoteric concepts regarding the way investor demand ebbs and flows between different Treasury securities (i.e. 2yr vs 10yr, etc).  More volatility could be on the way tomorrow. The BLS will release the Consumer Price Index (CPI) for January. This is the first major inflation report that comes out on any given month. Because inflation is a key consideration for rates, if CPI is meaningfully above or below the median forecast, rates often react accordingly.

Here at San Diego’s MCT Exchange 2026, the hallway chatter is varied. These are capital markets personnel, so things are pragmatic. One topic is Freddie Mac’s earnings: $2.8 billion in income for the fourth quarter of 2025 and $10.7 billion for 2025. Another is large companies becoming larger, exemplified by Tradeweb making an investment in MAXEX and by yesterday’s news of Pennymac entering into an agreement to acquire subservicer Cenlar (sponsor of this week’s podcasts with its 2 million loans). In fact, today’s podcast includes an interview with Pennymac’s Chief Strategy Officer Kevin Ryan on the acquisition of Cenlar. Yup, there’s no reason to think that the big won’t keep getting bigger in 2026, as has been mentioned many times in this Commentary. Credit score policy changes, political whipsawing, tariffs and their impact on the economy, new technology releases, and trends with correspondent investors are just part of the agenda, as they are with many other conferences in the coming weeks. Where lenders are prioritizing their resources in 2026 is important, and on today’s The Big Picture at noon PT Natalie Lanham, President & CFO of Willow Bend Mortgage, will be discussing that as well as single credit score implementation. (Today’s podcast can be found here and this week’s ‘casts are Sponsored by Cenlar. Cenlar supports lenders and investors with scalable, best-in-class loan servicing built for today’s complex market. From compliance to customer experience, Cenlar helps portfolios perform better, borrowers stay supported, and servicers focus on growth. We’re proud to partner with a true industry leader. Hear an interview with Kastle’s Rishi Choudhary on how AI agents are moving from hype to real impact in mortgage lending and servicing by automating unstructured, high-friction borrower interactions at scale, delivering measurable ROI through lower servicing costs, higher loan officer productivity, and production-proven deployments.)

When the jobs report makes a big statement, bonds are more likely to exhibit elevated momentum and volatility in the following days. In more than a few past examples, a big jobs report can set the tone for the entire month–all the way until the next jobs report comes out. Perhaps it’s the delayed release of yesterday’s report and the resulting juxtaposition with tomorrow’s CPI (also a relevant market mover), but bonds have immediately returned to the sort of sideways, uneventful trading seen on your average, boring trading day. In today’s defense, it is fairly average. And the results from this morning’s data (jobless claims at 227k vs 222k f’cast, 232k prev) are arguably boring.

Federal Reserve Bank of Kansas City President Jeff Schmid said the US central bank should hold rates at a “somewhat restrictive” level, as he expressed continued concerns over inflation that remains too high.

Adjustments related to higher credit risk weights for new acquisitions and rate shifts offset increases in the government-sponsored enterprise’s core earnings.

The Bureau of Labor Statistics issued its delayed January employment report Wednesday morning, showing the economy added 130,000 jobs in January. But the agency also sharply revised its estimates for total jobs created in 2025 to 181,000 from 584,000.

The federal government should step in to prevent an emerging patchwork of state regulations from stifling the benefits of applying the tools of generative artificial intelligence to the mortgage market.

Zillow Group Inc. forecast first-quarter profit that falls short of analyst estimates as the home-search site balances legal costs from ongoing litigation and expenses from the company’s partnership with Redfin.

Stunning Resilience

One could argue that our bar is set too low if we view today’s bond market resilience as “stunning,” but if that’s not the right word, it’s damn close. Last Thursday saw yields drop 8bps, largely due to a trio of labor market reports that are nowhere near as heavily traded as today’s jobs report. Yesterday’s Retail Sales helped yields slight significantly below the 4.20% technical barrier. And now today, an effective 0.2% lower unemployment rate (0.1% in the rate itself + 0.1% implied by the higher participation rate) and big beat in the payroll count are worth only a 3bp sell-off to 4.175%?  Yep, that’s stunning.  But why did it happen? That’s a question without a great answer today. We’ll discuss possibilities in today’s recap video.

Econ Data / Events

Average earnings mm (Jan)

0.4% vs 0.3% f’cast, 0.3% prev

Non Farm Payrolls (Jan)

130K vs 70K f’cast, 50K prev

Participation Rate (Jan)

62.5% vs — f’cast, 62.4% prev

Unemployment rate mm (Jan)

4.3% vs 4.4% f’cast, 4.4% prev

Market Movement Recap

09:48 AM Quick selling after jobs report, but not as bad as it might have been.  10yr up 4.3bps at 4.185 and MBS down 1 tick (.03) 

11:14 AM Impressive resilience continues. MBS unchanged and 10yr up only 2.7bps at 4.171

12:11 PM Even more impressive. MBS up 3 ticks and 10yr up only half a bp at 4.15

01:32 PM modest bounce after weaker 10yr auction. MBS unchanged and 10yr up 2.5bps at 4.169

03:18 PM Just a hair weaker with 10yr up 3.3bps at 4.177 and MBS still unchanged

Mortgage rates moved 0.03% higher today. On almost any other day, this would be a bit of a bummer, but in today’s case, it’s a victory. There was a ton of potential volatility in the underlying bond market heading into the day due to the scheduled release of the big monthly jobs report. In addition, rates had taken a bit of an anticipatory lead-off ahead of the data (or at least it looked that way). The implication was that a strong jobs report would come as a surprise and require a rapid correction toward higher rates–possibly significantly higher. Truth has been stranger than fiction. The job count crushed expectations and the unemployment rate fell to the lowest level since September. These numbers should have caused more damage than they did (i.e. we would not have been surprised to see mortgage rates jump twice as fast as they did, at the very least). What accounts for this welcome display of defiance? That’s unclear. It’s a phenomenon that’s playing out in the broader bond market and not just in the world of mortgage-backed bonds. Either way, we’ll take it!