WTMS Blog Today = What’s up in Mortgage Today (AM) – 12/31/2025
Mortgage markets kicked off the final trading day of 2025 with unexpected volatility as algorithmic traders reacted to stronger-than-expected jobless claims data. Initial unemployment claims dropped to just 199,000 for the week ending December 27, falling well below the 220,000 forecast and marking the strongest reading since early December. This surprisingly robust labor market signal sent bond yields higher and mortgage-backed securities lower in early trading.
Human traders remain scarce during today’s half-day session, leaving automated trading systems to drive most of the price action. The jobless claims figure may be artificially distorted by seasonal adjustment factors that haven’t fully adapted to Christmas falling on a Thursday this year. Historical data shows similar distortions occurred in 2014, the last time Christmas landed on Thursday, with claims data typically bouncing back to trend levels the following week.
Post-COVID employment patterns also differ significantly from pre-pandemic seasonal trends, adding another layer of uncertainty to today’s reading. Despite these technical considerations, bond markets sold off on the headline number as algorithms interpreted the data as economically positive. Federal Reserve meeting minutes released earlier this week continue to show deep divisions among policymakers regarding future rate cuts.
Most officials indicated support for additional rate reductions if inflation continues declining as expected, but several members expressed concerns about maintaining their 2% inflation target. The central bank’s December decision to cut rates by 25 basis points to a range of 3.5%-3.75% faced significant internal opposition, with three dissenting votes. Markets currently assign only a 20% probability to rate cuts at the January 27-28 FOMC meeting.
Agency mortgage-backed securities are experiencing broad-based selling pressure this morning following the employment data release. The benchmark 30-year UMBS 5.0 coupon dropped 12 basis points to 99.78, while the 5.5 coupon fell 6 basis points to 101.43. GNMA securities showed similar weakness with the 5.0 coupon down 6 basis points and higher coupons declining modestly.
This selling pressure directly translates to higher mortgage rates for borrowers, potentially affecting loans priced later today.
Locking vs Floating
Markets are entering peak holiday trading mode, which historically brings wider price swings that can occur without apparent fundamental reasons. The next significant risk event won’t arrive until the first week of January when normal trading volumes resume.
Originators with loans closing within the next 15 days should strongly consider locking given today’s unexpected volatility and thin trading conditions.
Today’s Events
– Continued Claims (December 20): 1,866K vs 1,923K previous
– Jobless Claims (December 27): 199K vs 220K forecast, 214K previous
Bond Pricing
UMBS 30 yr
| Coupon | Price | Intra-Day Change |
| 5.0 | 99.82 | -0.09 |
| 5.5 | 101.43 | -0.06 |
| 6.0 | 102.67 | -0.03 |
GNMA 30 yr
| Coupon | Price | Intra-Day Change |
| 5.0 | 99.83 | -0.06 |
| 5.5 | 100.98 | -0.03 |
| 6.0 | 101.91 | 0 |
Treasuries
| Term | Yield | Price | Intra-Day Yield Change |
| 2 yr | 3.463 | 100.071 | 0.013 |
| 3 yr | 3.519 | 99.948 | 0.008 |
| 5 yr | 3.698 | 99.672 | 0.02 |
| 7 yr | 3.911 | 99.022 | 0.031 |
| 10 yr | 4.143 | 98.843 | 0.02 |
| 30 yr | 4.819 | 96.945 | 0.013 |