Fannie Mae, Freddie Mac MBS Buying Raises Rate-Vol Tail-Risks ($200 Billion In Agency MBS Generates 30-Year Rate Of 5.99%)

President Trump ordered Fannie Mae and Freddie Mac to operate like The Federal Reserve. Buying assets to manipulate interest rates. In this case, F&F have been ordered to buy $200 billion of agency MBS.

President Donald Trump’s directive for Fannie Mae and Freddie Mac to buy $200 billion of agency MBS is supportive for Treasuries at the margin, but it also increases traditional mortgage hedging dynamics in rate markets.

Thursday’s Truth Social post triggered an immediate snap tighter in mortgages, led by the belly and lower coupons. By pulling MBS spreads tighter and crowding out real-money buyers, Fannie and Freddie’s purchases would push incremental demand into Treasuries as the next-best duration substitute, putting a modest bid under the belly of the curve.

However, execution and the ultimate size of purchases is still unclear, as my colleague Alyce Andres noted. If the government-sponsored enterprises GSEs stagger purchases, and signal an ultimate increase above the announces $200 billion, further tightening should occur. They can fund a lot of the buys from existing liquidity portfolios, though there’s a path where they could issue short-term debt to preserve operating buffers and could nudge repo wider at the margin.

The bigger transmission channel is hedging, as highlighted by colleagues Ira Jersey and Will Hoffman. Unlike the Fed, the GSEs actively hedge MBS holdings, shedding duration by paying fixed rates in swaps and using swaptions to manage the negative convexity and vega risks embedded in mortgages. That matters for swap spreads and for volatility, especially in the belly.

That’s why GSE MBS purchases don’t have to be huge to change the feel in rate markets. The post-Global Financial Crisis regime dulled the classic convexity feedback loop because the Fed held such a large amount of agency MBS and didn’t hedge it, while the GSEs shrank their portfolios. Trump’s directive risks bringing more of that regime back.

A recent note out of Goldman Sachs frames it cleanly: A $200 billion build could lift the active convexity-hedger footprint by about 25%. The street then starts front-running the mechanical flows — paying in selloffs, receiving in rallies — which makes breakouts more likely even if day-to-day ranges look calm, Goldman added.

Positioning makes the setup more precarious. JPMorgan already saw mortgage valuations as a “bit snug” before the announcement, while BofA flagged that rates market had recently added fresh belly shorts sitting against a backdrop of benchmark funds still overweight MBS versus IG.

That mix can keep the initial tightening sticky, but it also raises the odds of sharp reversals if the market decides the purchasing flows are slower, smaller, or more heavily hedged than hoped.

Fannie and Freddie’s retained portfolio are soaring along with the duration gap.

The effect on mortgage rates has so far has been negligible. The 30-year conforming mortgage just fell below 6% at 5.99%.

US Q4 Real GDP Forecast Is 5.4% As Trumps Orders GSEs To Buy $200 BILLION In Mortgage Bonds (Exports Rising At 6.1% And Imports Falling -9.4%)

It looks like President Trump wants ANOTHER Federal Reserve. He has ordered the GSEs (Fannie Mae and Freddie Mac) to purchase $200 BILLION in mortgage bonds in an attempt to lower mortgage rates. Puzzling since real GDP growth is soaring.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 is 5.4 percent on January 8, up from 2.7 percent on January 5. After recent releases from the US Bureau of Economic Analysis, the US Census Bureau, and the Institute for Supply Management, the nowcast of fourth-quarter real personal consumption expenditures growth increased from 2.4 percent to 3.0 percent, while the nowcast of the contribution of net exports to fourth-quarter real GDP growth increased from -0.30 percentage points to 1.97 percentage points.

The 5.4% real GDP forecast is largely due to exports rising at 6.1% and imports falling -9.4%.

Looks like Trump’s tariffs are working.

Mortgage Demand Decreased 9.7 Percent From Two Weeks Earlier (Biden-era Malaise Continues)

Mortgage demand is recovering slowly from Biden-era mismanagement. Rising mortgage rates coupled with rising home prices made housing affordability get flushed down the toilet.

Mortgage applications decreased 9.7 percent from two weeks earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 2, 2026. The results include an adjustment for the holidays.

The Market Composite Index, a measure of mortgage loan application volume, decreased 9.7 percent on a seasonally adjusted basis from two weeks earlier. On an unadjusted basis, the Index decreased 28 percent compared with two weeks ago. The unadjusted Refinance Index decreased 31 percent from two weeks ago and was 108 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 6 percent from two weeks earlier. The unadjusted Purchase Index decreased 23 percent compared with two weeks ago and was 10 percent higher than the same week one year ago.

The holiday adjusted Refinance Index decreased 14 percent from two weeks ago and was 133 percent higher than the same week one year ago.

Housing Prices! Chicago Leads All Major Markets With 5.8% Annual Gain (Followed By New York At 5.0% And Cleveland At 4.1%, Tampa Recorded 4.2% Decline)

This is the opposite of the housing bubble from The Big Short where home prices in Phoenix, Las Vegas, Los Angeles and Florida rose then crashed. Instead, the fastest growing cities are in the northeast and midwest.

The Case-Shiller 20-City Home Price Index rose 1.3% year over year in October 2025, easing from a 1.4% increase in September and coming in slightly above market expectations of a 1.1% gain. This represents the smallest annual increase since July 2023, reinforcing signs that the US housing market is settling into a much slower growth phase. Home price appreciation continues to trail consumer inflation. With October CPI estimated at around 3.1%, inflation-adjusted home values appear to have edged modestly lower over the past year.

Regional data point to a pronounced geographic rotation. Chicago now leads all major markets with a 5.8% annual gain, followed by New York at 5.0% and Cleveland at 4.1%. In contrast, Tampa recorded a 4.2% decline, the steepest among the 20 cities, and its 12th consecutive month of falling annual prices. Other former pandemic boom markets, especially in the Sun Belt, are seeing the sharpest declines, led by Phoenix (-1.5%), Dallas (-1.5%), and Miami (-1.1%).

Housing price growth has stalled even though M2 money growth is higher YoY.

On the silver front, silver regained losses yesterday, but increased margin requirements are causing losses again.

Today.

Housing Thunder? Pending Home Sales Surge 3.3% MoM (Highest Since Feb 2023)

Housing thunder? Or housing lightning!

Pending sales of existing homes in the US surged 3.3% MoM (more than the expected 0.9% MoM move) in November as a modest improvement in prices and mortgage rates encouraged buyers.

The gain was broad-based across regions and exceeded all but one estimate in a Bloomberg survey of economists, but left the YoY change in sales somewhat stagnant on an NSA basis.

Signings have now increased for four straight months, matching a streak seen during the frenzied housing market of the pandemic.

The trade association’s report on Monday showed contract signings rose in each US region last month to their highest levels of the year. The West posted the largest increase, followed by the South, the nation’s largest home-selling region.

November’s surge dragged the Pending Home Sales Index to its highest since Feb 2023…

Bloomberg reports that the recent data point to the gradual improvement many economists see for the housing market into 2026.

Mortgage rates that were close to 7% in May have since settled in the 6.3% to 6.4% range, and home prices are growing at a much slower rate compared to last year.

That’s helped fuel small gains in contract closings in recent months. However, economists and industry experts have widely different expectations for next year.

In a recent survey of nine market analysts, estimates for the home resale market ranged from 1.7% to 14% sales growth, with the rosiest projection coming from NAR’s Yun.

Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold.

Simply Unaffordable? A Different View Of US Housing Prices (Gov’t Needs To Stop Manipulating The Housing Market)

Politicians love to scream about housing being simply unaffordable. Like mayor-elected Mandami in New York City. But the reality is that housing prices vary by city and there are more affordable cities than New York City to choose from. Federal policies should not be focused on letting people staying a particular city.

When we look at housing prices compared to average hourly earnings, we see housing prices rising with average hourly earnings … as expected.

If we look at year-over-year changes, we see the Covid bump in housing prices corresponding with the surge in Federal spending. But things have simmered down since the bump in 2020-2023.

My suggestion is for the Federal government to stop interfering in the housing market.

Keep On Printing? US GDP Still Growing At 3.5% Despite Malaise In Construction And Imports (So Much For Tariff Hysteria)

Well, tariffs didn’t turn out to be a lethal weapon as Democrats predicted. The US economy continues to grow!

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 3.5 percent on December 16, down from 3.6 percent on December 11. After this morning’s releases from the US Census Bureau and US Bureau of Labor Statistics, the contributions of consumer spending and inventory investment to third-quarter real GDP growth fell slightly to 1.84 and 0.09 percentage points, respectively.

All signs except real estate construction and imports point to continued economic growth.

But as long as The Federal Reserve continues to print money (M2), the economy will continue to grow. Keep on printing?

Keep on printing?

Government Spending Helped Kill Mortgage Demand! Mortgage Demand Decreased 3.8 Percent From One Week Earlier

Nobody wastes money like government, particularly around events like Covid where Federal spending led to housing prices spiking after Covid outbreak in 2020. This made housing unaffordable for most households. This in turn helped kill the mortgage market.

Mortgage applications decreased 3.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 12, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 13 percent higher than the same week one year ago.

The Refinance Index decreased 4 percent from the previous week and was 86 percent higher than the same week one year ago.

Once again, the government response to the Wuhan Covid virus of 2020 helped drive up housing prices killing off mortgage demand.

Little Tariff Effects! US Q3 Real GDP Growth At 3.5%, Real Estate Construction Growth Remains Negative

The US economy is goin’ home! The hysteria about tariffs is nonexistant.

Latest estimate: 3.5 percent — December 05, 2025

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 3.5 percent on December 5, down from 3.8 percent on December 4. After this morning’s personal income and outlays release from the US Bureau of Economic Analysis, the nowcast for third-quarter real personal consumption expenditures growth declined from 3.1 percent to 2.7 percent.

Unfortunately, residential and non-residential construction are negative as are imports.

Winter Effect! Mortgage Purchase Demand Fell 32% From Previous Week (Expected To Rise In January)

Mortgage demand is beginning to look a lot like Christmas. That is, mortgage demand will be listless in December (like the infamous Lake Erie snow effect), but leap upwards in January 202.

Mortgage applications decreased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 28, 2025. This week’s results include an adjustment for the Thanksgiving holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 33 percent compared with the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index decreased 32 percent compared with the previous week and was 17 percent higher than the same week one year ago.

The Refinance Index decreased 4 percent from the previous week and was 109 percent higher than the same week one year ago.

Mortgage rates moved lower in line with Treasury yields, which declined on data showing a weaker labor market and declining consumer confidence. The 30-year fixed mortgage rate declined to 6.32 percent after steadily increasing over the past month. After adjusting for the impact of the Thanksgiving holiday, refinance activity decreased across both conventional and government loans, as borrowers held out for lower rates. Purchase applications were up slightly, but we continue to see mixed results each week as the broader economic outlook remains cloudy, even as cooling home-price growth and increasing for-sale inventory bring some buyers back into the market.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.32 percent from 6.40 percent, with points decreasing to 0.58 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.