WTMS Blog Today = What’s up in Mortgage Today (PM) – 01/07/2026

Mortgage-backed securities began the day with promise but lost steam after a mixed bag of economic data. The ADP employment report showed private payrolls added just 41,000 jobs in December, falling short of the 47,000 forecast but representing a recovery from November’s loss of 32,000 jobs. This relatively weak showing initially supported bond prices as investors saw it reinforcing the case for continued Fed rate cuts.

The ISM Services PMI threw a wrench into the optimistic narrative with a strong reading of 54.4 versus expectations of 52.3. More concerning for rate watchers, the employment component jumped to 52.0 from 48.9, while new orders surged to 57.9 from 52.9 in November. Anytime we see a significant uptick in employment metrics during non-farm payroll week, it raises yellow flags for Friday’s jobs report.

JOLTS data painted a mixed picture with job openings falling to 7.146 million versus the 7.60 million forecast – normally good news for bonds. However, this positive was offset by the quits rate climbing to 3.161 million from 2.941 million, suggesting workers remain confident enough to leave their jobs. Higher quit rates typically indicate a tighter labor market, which runs counter to the Fed’s disinflationary goals.

The net result was MBS giving back morning gains, falling an eighth of a point from their highs. The 10-year Treasury yield ended at 4.158%, up 2 basis points from pre-data levels but still down modestly for the session. This afternoon’s pricing reflects the market’s uncertainty about labor market strength heading into Friday’s crucial employment report.

Mortgage applications fell 9.7% over the holiday-adjusted two-week period, with purchases down 6% and refinances dropping 14%. Despite mortgage rates starting the new year at 6.25% – their lowest level since September 2024 – borrower demand remains tepid. The average loan size of $408,700 represents the smallest figure in a year, suggesting either smaller home purchases or refinancing activity concentrated in lower-balance loans.

Locking vs Floating

With Friday’s non-farm payrolls report looming and today’s data showing conflicting signals about labor market health, risk-averse originators should lean toward locking. Average mortgage rates are sitting near long-term lows, making the risk-reward calculus favor protection over speculation. The combination of ADP, JOLTS, and ISM data introduces significant potential for range departure in either direction.

Today’s Events

– ADP Employment: 41k vs 47k forecast, -32k previous
– ISM Non-Manufacturing PMI: 54.4 vs 52.3 forecast, 52.6 previous
– ISM Services Employment: 52.0 vs 48.9 previous
– ISM Services New Orders: 57.9 vs 52.9 previous
– ISM Services Prices: 64.3 vs 65.4 previous
– JOLTS Job Openings: 7.146M vs 7.60M forecast, 7.670M previous

Bond Pricing

UMBS 30 yr
| Coupon | Price | Intra-Day Change |
| 5.0 | 99.8 | 0.02 |
| 5.5 | 101.54 | 0.08 |
| 6.0 | 102.67 | -0.02 |

GNMA 30 yr
| Coupon | Price | Intra-Day Change |
| 5.0 | 99.85 | 0.04 |
| 5.5 | 101.11 | 0.05 |
| 6.0 | 101.97 | -0.11 |

Treasuries
| Term | Yield | Price | Intra-Day Yield Change |
| 2 yr | 3.476 | 100.047 | 0.012 |
| 3 yr | 3.534 | 99.904 | 0.008 |
| 5 yr | 3.712 | 99.609 | 0.002 |
| 7 yr | 3.923 | 98.952 | -0.003 |
| 10 yr | 4.16 | 98.7 | -0.009 |
| 30 yr | 4.841 | 96.599 | -0.018 |