MIG Market Watch, January 5th, 2026

MIG Market Watch, January 5th, 2026

Posted by : Moneek-2

Market Comment

Mortgage bond prices finished the week near unchanged which held rates steady. Trading was very thin with minimal price movements due to the holiday and few data releases. FHFA housing rose 0.4% vs 0.1%. The Fed Minutes noted “Market participants did not materially change their macroeconomic outlooks and continued to interpret data made available over the intermeeting period as consistent with a resilient economy.” The release also indicated, “nine members agreed to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3-3/4 percent. Three members voted against that decision; two preferred to leave the target range unchanged, while the other preferred to lower the target range 1/2 percentage point.” Mortgage interest rates finished the week with discount points near unchanged.


LOOKING AHEAD

Economic
Indicator		Release
Date & Time		Consensus
Estimate
Analysis
ISM IndexMonday, Jan. 5, 10:00 am, et48.3Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP EmploymentWednesday, Jan. 7, 8:30 am, etUp 50KImportant. An indication of employment. Weakness may bring lower rates.
Factory OrdersWednesday, Jan. 7, 10:00 am, etDown 1.0%Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. s
Trade DataThursday, Jan. 8, 8:30 am, et$59.4B deficitImportant. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Weekly Jobless ClaimsThursday, Jan. 8, 8:30 am, et205KImportant. An indication of employment. Higher claims may result in lower rates.
EmploymentFriday, Jan. 9, 8:30 am, et4.5%, Payrolls +55KVery important. An increase in unemployment or weakness in payrolls may bring lower rates.
U of Michigan Consumer SentimentFriday, Jan. 9, 10:00 am, et53Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Year Ahead

The future of the economy will continue to be debated. Stocks started shaky but posted heavy gains for 2025. The recent data, Fed statements, and Fed press conferences signal the possibility of additional rate cuts some time in 2026. The biggest concerns remain inflation, economic recovery, and global uncertainty. The official Fed projections only show a single rate cut in 2026 but also note that data can change that outlook. The next Federal Reserve meeting is the end of January. The current odds of a Fed cut at that meeting are less than 15%. The majority see a 25-basis point cut sometime between now and the April Fed meeting. However, a lot can change between now and then and there are several significant economic releases that will impact that decision. The most important being the employment report each month. The release this week will likely set the tone for rates going forward. Another positive is the fact the Fed continues to hold more than $2 trillion of mortgage-backed securities which has kept mortgage rates lower than they would be otherwise. However, The Fed has formally shifted to reinvesting all principal payments from its agency MBS and agency debt holdings into U.S. Treasury securities (specifically Treasury bills), rather than back into MBS, as part of its post‑QT balance sheet strategy.

The Fed remains “data-dependent” so the possibility for future rate volatility remains high. Be especially cautious heading into data.