Rate Stability, Soft Jobs & Investor Shifts + Jan. 2026 Data | Feb. 9, 2026

Optimal Blue (: 00:00

think we had good start to the year, strong start. 16 % increase month over month in terms of rate lock volume, 36 % increase year over year. we had a little bit of a rate rally term locks picked up 50 % month over month, 400 % over the same time last year, So we're living in a different world than we were 12 months ago, certainly.

Jim Glennon (: 00:40

Welcome to Optimal Insights. I'm your host, Jim Glennon, Senior Vice President of Hedging and Trading Operations at Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary. And these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode. Hi, welcome everybody. is February 9th. A lot going on, a lot to talk about.

and in the interest of making sure you know what to watch as an originator, a capital markets person, or just someone who's interested in the mortgage industry and some great market commentary. We will kick it off here in a little bit with a market update. We'll talk with James and Alex about everything that's been going on and keeping the market pretty volatile over the last week or so. Interest rates have been relatively steady, but we are seeing a lot of volatility in equity markets, crypto, precious metals.

tech especially on the equity side. So we'll talk a little bit about why that is. And then after the market update, we will get into the market advantage report. As always, you'll be getting a preview today of the highlights of the market advantage report. we'll have Mike Vough and Brennan O'Connell on to talk through some of the highlights of it, give you a little bit of a preview on what's new in mortgage data. we get to any of that, just in the way of our own kind of interest rate,

high level data, the OBMMI is at 6.08. That's the conventional 30 years. So stubbornly at the six handle. We'd love to see a five handle at some point. And we touched on it late, late last year and a little bit earlier this year, but still kind of in that six and an eighth range. But the spread between mortgages and treasuries continues to be tight. Treasuries are still at 4.2, 4.22, high compared to where

We'd like to see it as well, but again, that spread is less than two points between OB-MMI and the treasury, which is a good thing. Otherwise, under the spreads that we were looking at last year, especially early last year, we would have expected to be more like six and three eighths, six and a half on the OB-MMI with the treasury being where it is today. So good news there. yeah, let's get into a market update here with James and Alex and pull some of these dynamics together.

Jim Glennon (: 02:52

Okay, welcome Alex, James. Thanks for being here on this, I don't know what they're calling it, Hangover Monday, Monday after the Super Bowl, kind of a boring game. Hopefully you all had a decent time anyway. get right into it. So definitely some things to talk about in terms of the market. It doesn't feel like there's any one single thing that's driving it right now, but there's so much going on. It feels like something's coming.

in terms of just a shift in the market. And it feels like it started happening last week, right? had tech got slaughtered, right? NASDAQ got beat down. The AI heavyweights got beat down. and silver, unfortunately, got beat down as well. That was kind of a popular trade there for a while. And then meanwhile, you have like a rotation into like the Dow Jones hit a new record and value stocks like on the Russell started to perform better.

is something that's kind of been going on since late last year. Commodities in general got beat down. Crypto took a dive and is even kind of in a range now where folks are wondering what the longevity looks like for things like Bitcoin. All while we're increasingly interesting signals from some of the economic numbers we're seeing, especially around labor, right? Kind of, I would say on the average, poor labor numbers last week.

this week we've got a ton of numbers coming out. So how should we be thinking about this? think Alex, you've got some notes on this. Like what's our focus going into this week? And of course the Fed is in the background too with everyone and their brother and sister speaking this week.

Alex Hebner (: 04:28

Yeah, yeah, definitely. with you. It does feel like we're waiting for a catalyst in the market. And in the meantime, especially in equities right now, it seems to be there's some rebalancing from more tech heavy and asset light industries into more asset heavy industries. saw like consumer staples up pretty hard last week in addition to industrialism and doing all right as well.

of a maybe potentially like a Trump trade of sorts, know, the push for reindustrialization such an America, not that the numbers support that at the moment, but that does seem to be kind of the push towards more hard assets. And there's questions just around the longevity of, like you said, Bitcoin, and then also what AI is going to look like in the year to come. I don't think that trade is over by any means. I mean, all the major tech companies just announced

massive capex that blows the: 2025

I think we talked about it a lot last year, but refinancing of the U.S. debt, we're well over 100 % of GDP. That's GDP ratio now. is, I think, going to be a perennial question on keeping financing rates low for the U.S. government. And I expect us to have more conversations around that in the pretty near future here. looking at short term, what was happening last week, like you said, we did see a little bit of weakness in the labor market. I think it continues to...

ember and that was capped off: 2025

some additional numbers. We're going to get a late BLS non-farm labor report that should have been released this last Friday, but due to a government shutdown that almost no one talked about and lasted just a matter of days, it is delayed by a few days here.

Jim Glennon (: 06:59

All right. So yeah, starting to feel it. Interesting what you say about the just kind of shying away from the growth trade a little bit. I'm kind of stuck on that, right? And into this more value or Trump trade or the kind of old school stocks that are backed more by assets or maybe even a recession trade, right? Or people thinking maybe recessions come and usually get into, you you start start buying Campbell's when when things start to be looking a little

scary by target. I don't know. What do you think about this all James with the trade shifting probably temporarily, right? It's not the AI trades not going away, but it is. It's slowing down right now. Folks are taking a beat.

James Cahill (: 07:42

definitely saw this as a step back from AI. Not every company is as good as Optum and Blue is. We've released a couple of AI assistants. You can talk to your account managers about those if you'd like to. not everyone has found an immediate use for these tools. And we've spent billions and billions of dollars in the American economy. We are building out these data centers for even more. come Google and Anthropic and Oracle are making their

yearly statements, they're saying, we're going to spend even more money on this. And people are looking at this and going, those are huge capex expenses. These are gigantic uses of money that you can't really answer the question, what for yet? So, you know, if you're thinking of a stock is indicative of a company's future cash flows, if you're spending a ton of money and it might not be coming back, it's not really an optimal thing.

Jim Glennon (: 08:24

Mm-hmm.

James Cahill (: 08:37

So a lot of people definitely have been looking at this very skeptically and as each AI company kind of came out and said, yeah, we're to be spending even more money. I think that kind of drew people nervously away from it. Exactly as you've been saying, the jobs report came out and it is the Challenger report. It wasn't the official BLS that comes out this week. Challenger does tend to be a little bit less conservative. They have been accused of overshooting a little bit.

But that number was terrible. It did not look good for the US economy. It shows a lot of weakness and that kind of made people nervous. ⁓

you know, would we cut rates if that's the case? If you go back to cutting rates as inflation come back, if we're getting higher inflation and less jobs, then it's the stagflation word that we dropped earlier this year. So it was definitely a lot of nervousness and where do you put your money? People have been kind of struggling to find is it gold, gold appreciated so quickly? Is it Bitcoin, Bitcoin suddenly dropping off as people aren't feeling as good? It might be a speculative asset.

It kind of suddenly back to, well, there are a lot of companies out here that are just trending along totally fine and aren't part of this AI trade and do have workers who are working, making money. And suddenly those, large caps, small caps, cause they're just not in the magnificent seven. suddenly those look very safe, like a lot better. And so you see the S and P and the NASDAQ kind of picking up.

Jim Glennon (: 09:54

Mm-hmm.

Yeah, it's, it's, I mean, to bring this back to rates too, right? Last week, we did see the yield curve steeper than it's been in many years. So that means that short-term rates did react pretty heavily to some of those bad jobs numbers and could again, later this week when we see the actual unemployment report, but it didn't do much for long term rates at all. Right. We're still at like 6.08 on the OBMMI, the 10 years still over 4.2.

As we've been saying all along that there's just so much debt out there and so much uncertainty that we're not, it's unlikely we're to get much downward pressure on long-term rates, but a lot of these economic reports do seem to be pushing short-term rates lower, meaning that we think there may be, maybe the two cuts for the Fed is too low, right? Maybe we start inching towards a third cut or even a fourth cut if we see the economy continue to stumble and the jobs continue to stumble. So Wednesday's report feels like a big one.

potentially as we've been lingering around the zero build job build number, right? We went from hundreds of thousands of jobs being built to tens of thousands and now potentially zero or even negative, right? And then, and then we've got inflation numbers in the same week, which is fun. I think it's kind of a busy week, right? Like what, does this week lay out Alex in terms of the schedule? Does it start? Does it really start Wednesday with the BLS number?

Alex Hebner (: 11:31

Yeah.

Yeah, Wednesday is what I'm going to keep my eyes just from a data perspective. As we discussed here, I think this will kind of be, I can call it a tipping point, but it's going to give us a, it's going to be a nice cherry on top of the data that we already have. It's expected right now that this non-farm report will show somewhere in the neighborhood of 55,000 new jobs, which if you've been tracking over last five years, that's a pretty weak reading the post COVID era. I think that was, you

relatively normal pre-COVID. But again, if we see a big miss to the downside, it's gonna definitely highlight everything that we've talked about here. then Friday, I think that's gonna be like the second big release, keep an eye on for the week. That's your CPI number, that's got the consumer price index, what you're paying at the checkout counter for your basket of goods. What I'm kind of keeping an eye on there is if we're seeing bleed through of...

the higher numbers we've seen on PPI, the producer index. The November number saw a kind of sharp jump in the goods number and the December number showed a sharp jump in the services number. So there does seem to be pressure on both sides of the PPI inputs and it's just ⁓ we just want to see if that's being felt by the everyday consumer. As we've talked about many a time, the consumer probably is, the average consumer is probably

Jim Glennon (: 12:28

Mm-hmm.

Alex Hebner (: 12:54

near a tapping out point with the way credit card balances are looking at this point.

Jim Glennon (: 13:02

Yeah, you and James were both commenting before we started recording about how the estimate for CPI at 2.5 seems low, especially with some of the other inputs that we've been able to see, with PPI being closer to that three number or a little above year over year. But could that be what you just said, right? If the consumer's reaching a tap out point, the consumer's being more careful about what they're spending money on.

Could it be that we're just, as we've talked about on this podcast a bunch, are we just seeing that margin continue to compress or the consumer's not willing to take on continued increases in escalation of prices, whether it's due to tariffs or anything else, but the producers are kind of having to eat it. is that, is there a little bit of a cushion there that's continuing to keep the consumer a little bit insulated from some of these price increases?

Alex Hebner (: 13:43

Yeah.

That could be a good potential argument, I'd say, for why they might be expecting this CPI number to be a little bit lower is ⁓ a demand contraction, for sure. Yeah, just people watching the budget, only paying for the essentials, filling the shopping cart, so to say, when they're at the store. yeah, that 2.5 % estimate did just seem a little bit low considering the last few releases have been closer to like 2.7 on average.

Jim Glennon (: 14:06

Mm-hmm.

Mm-hmm.

Alex Hebner (: 14:17

over the last year, I'd have to pull the numbers for where we've averaged over the last year for that year over year number. just seems like a little bit low in that anything above that is gonna scream inflation. So just not a lot of wiggle room there is all I would say. But we are expecting 2.5 % year over year, 0.3 % month over month.

Jim Glennon (: 14:28

Mm-hmm.

James Cahill (: 14:35

Jim, I might push against you a little bit with the most recent consumer sentiment report came out and it was higher. So it does indicate, you know, all of these numbers are lagging. So they would line up together. It does indicate people have actually been feeling a little bit better about their spending, not quite hitting the limit that you might think. So I'm with Alex on that, that 2.5 number just, it seems optimistic to me be excited to see it, but.

I don't think we've seen a lot of optimistic inflation reports over the past couple of months. So buckle up for something a little bit higher and the markets react.

Jim Glennon (: 15:12

Right. that's estimates are a funny thing, right? If we were estimating 2.8 and it comes in at 2.8, it's probably fine, but because we're estimating two and a half, if it comes in at 2.8 or higher, or even 2.7, we probably get a bounce in rates. We probably get a little bit of, I don't know, a dour review on that release. And then yeah, also funny can be consumer sentiment type of surveys. You know, what are...

What are folks really reading and paying attention to and how is it affecting their psyche and hence their reporting on some of these surveys? maybe the inflation, new, you know, 3.0 is the new 2.0. So folks have felt good about stable inflation, at least over the past year or so. And maybe there's not, maybe everybody doesn't have a cousin or a friend who lost their job recently. So they're not kind of feeling that negativity yet.

So maybe we're in another spot where we continue to spend, right? Retail sales will tell us another story. If there is some sort of demand contraction, you're gonna see that in the actual spending versus, you know, trying to tease it out of people's response to a survey that says, you gonna, you know, are you gonna spend more of this next year? Do you feel like inflation is under control? Do you feel like the job market is healthy? Anyway.

Alex Hebner (: 16:29

It's definitely

been an interesting dichotomy. agree. mean, with James, the numbers don't lie on what those consumer sentiment surveys have said. They've been extremely weak. I think they bottomed out in November or so. But at the same time, I think it's, again, the story of the K-shaped economy. The economy is really being driven both at the consumer level and at the capex level for businesses by a select few. the rich have continued to spend when it comes to going out to restaurants, spending more at the grocery store.

And the same goes for businesses. mean, again, we're looking at hundreds of billions of dollars from seven companies. So, you know, just a lot of parallels between the two.

Jim Glennon (: 17:06

And a lot of it being financed by debt, reminding everybody of that. That's a good reason. Again, why long-term rates don't seem to want to budge lower is a lot of these big tech capex investments are being financed by hundreds of billions of dollars of debt or soon will be. And some of that debt took, by the way, took a bit of a beating last week. The prices on some of the debt that's been used to finance things like AI and building server farms and power infrastructure.

Took a pretty good hit last week. Corporate debt is just a funny thing that way too. Like it's part of the reason that big corporations use debt to finance is a small chance you walk away from that debt at some point, it doesn't get paid off, right? I mean, some of it is just to take advantage of economies of scale and to spend less actual cash. But some of it is too, with the understanding that it may only be worth 50 or 60 or 70 cents on the dollar.

Again, we've said there's going to be some losers in this whole tech behemoth battle. They're not all going to make it. There's not enough revenue out there in the world over the next 30 years for all of these, these growth stories to come true. Right. And like with any kind of boom, there's going to be some of these companies are going to be bankrupt in the next five years. So you have to sort of think about it. I think that reality.

Alex Hebner (: 18:25

And that was part of the narrative for the sell everything that we saw last week, especially in the tech world for is just question marks around the private credit markets. Private credit markets have exploded since the global financial crisis, ⁓ stepping into where traditional lenders used to be, but because of restrictions, post global financial crisis haven't been able to lend to those markets. And there's just questions around the mark to market on a lot of the debt that's been issued by these private credit markets.

just because the, again, the regulations aren't there that they have to mark to market daily or whatever it may be. I've definitely seen a growing number of stories surrounding in that space. So don't even get too deep onto it on this podcast, but I do think it's something interesting to keep an eye on.

Jim Glennon (: 19:06

Mm-hmm.

Right. Well, maybe the last thing we cover, speaking of podcasts, Mirren, Myron, Myron, is going to be, I think maybe right now is recording a hopefully long form podcast at the University of Boston, right? Boston University. potentially a competitor of ours, right? The Is Business Broken podcast.

Alex Hebner (: 19:18

Iron.

James Cahill (: 19:31

Thank you.

Jim Glennon (: 19:34

That could be an interesting development. think anytime you get a high level, influential government type person on a podcast and you get them chatting a little bit, especially if they don't have the ability or the need to go back and do a bunch of editing of said podcast could get some interesting nuggets, I think, out of this interview with Myron. I'm hoping to listen to that here in the next few days when it gets published.

Alex Hebner (: 19:58

Absolutely. Yes. He's speaking Boston university this Monday, February 9th in the evening. I'd expect it to be on the is business broken podcast, wherever that is distributed. I already checked it is on Spotify. If you want to take a listen to that in the, in the coming days, definitely an interesting listen. know he's probably one of the most interesting characters on the federal reserve board right now. Everyone's wondering what he and worse are thinking. And in addition to that last week, he did resign from the white house economic counselors.

as an advisor. So it seems he's going to be taking a more permanent role here at the Federal Reserve.

Jim Glennon (: 20:32

Right. And potentially one of our most dovish on the Fed and potentially one of the more dovish voters when we get to that point later this year. So interesting. All right. Listen up for that. Obviously listen to our podcast first and then check that one out. All right. What else? Do we miss anything today?

Alex Hebner (: 20:44

Absolutely.

Don't think so. Yep.

Jim Glennon (: 20:52

Just a lot of feds speak, right? Look, look out for

fed speakers. They typically are not going to speak out of class, right? But you can get little nuggets in there here and there every once in a while, the market will tick or move on something that is said by anyone on the fed with certainly a voting member. ⁓ just a lot of that going on this week and the BLS, which will be the unemployment report. And then the CPI report comes out following that on Friday. So a lot, a lot to chew on.

Also just the volatility in the market is something to keep an eye on with just the shift in equities with that much cash flying around. You're going to see moves a little bit of a move in the bond market. You're going to see crypto. You're going to see precious metals continue to shift around pretty wildly. So I'll keep your helmet on.

All right, gentlemen, great conversation as always. Thank you for your time. Talk again soon. Thanks, guys.

Alex Hebner (: 21:39

Thanks, John. Talk soon.

James Cahill (: 21:40

Thank you as always.

Mike (: 21:41

Welcome to the first advantage for Optimal Blue. I'm excited to hear what the data is telling us about January here. Do you want to kick us off?

Optimal Blue (: 21:53

Absolutely. I think we had good start to the year, strong start. 16 % increase month over month in terms of rate lock volume, 36 % increase year over year. Carried by another strong refi surge, we had a little bit of a rate rally term refi locks picked up 50 % month over month, 400 % over the same time last year, right? So we're living in a different world than we were 12 months ago, certainly.

the same time in: 2025

very, very cold winter weather impacted January. So I don't know if we should read too much into the purchase volume numbers. We'll see what happens in February and March. And certainly as we get into the spring buying season, I think before we need to take any real, strong opinions on, on where 26 is going to be in terms of rates, we dropped seven BIPs, on the benchmark, OBMMI. So.

Again, I mentioned this, I think probably every month, but that's the underlying value for the CME mortgage rate. Future product, our OBE index fell from 6.14 % to 6.07%. Jumbo rates dropped as well 16 bips to about six and a quarter percent. VA rates shaved off seven bips to 5.64 % and FHA rates were basically flat, just a hair below 6 % at 599.

The most encouraging on the rate front though, was that if you look at just the average rate lock across the optimal blue pricing engine, all products, all geographies in January was below six. And that was the first time we saw that since August of 22. So that five handle, a lot of psychology there, I think, you know, we sort of as an origination community believe that this would sort of propel forward folks that maybe were

son for optimism heading into: 2026

VA lending picked up. So for the folks out there, they're listening, they might be interested in the prepay stories. We see this when there's a rally in rates. The VA refinance machine is very quick to react. And we saw that in January, VA volume overall ticked up, driven by a pickup in refinances, the VA Earl product. And I would think that that's going to lead to some prepayment pickups.

on the VA side on the Jenny Mae side here in February and into news in terms of credit across the board, average credit scores ticked up for both cash out and rate term refis, two points on cash outs and five points on refis, excuse me, rate term refis. So pretty, pretty significant increase there. Same thing on products, conforming FHA and VA all up, the VA was up four points on the credit side as well. So think you see this dynamic.

refi is pick up the more financially savvy higher credit score borrowers jump in really quickly and you see this sort of average tick up. then on the for affordability side, first time home buyers ticked up, let's see, 2 % for conforming loans to 45 % overall. 40, 40, 45 % of Fannie are going to first time home buyers, which is great. And then FHA up

another 1 % to 70 % total. So ⁓ good to see that the loan production is trending towards this first time home buyer class, which there's been a lot of discussion around how that folks that are in that situation have sort of been priced out of the market, but good to see the pick up here. And purchase lock debt to income ratio has dropped. So again, from an affordability perspective, seeing that mortgage payment

levels relative to incomes dropping is always a good sign for for borrowers and what's good for borrowers is good for originators. How about on let's see is that it that's there I think that's it on sort of the primary side of the origination side Mike what's going on in the secondary world?

Mike (: 26:40

Yeah, I think the big thing for January has been a mix of maybe rosier expectation the investor class, so the folks buying these loans from originators. So the first stat of note is our best effort mandatory spread increased. So this is spread embedded in pricing to effectively incentivize lenders to hedge the loans themselves. We saw that best effort mandatory spread across both conventional and government 30-year both increased about eight basis

points. did see the conforming 15-year spread decrease about 15 basis points, which is interesting. seeing some more exposure or more demand for arms. That's maybe eating out of that 15-year best-seller mandatory spread right now, but that's something to keep an eye on.

dpoint since the beginning of: 2024

100 basis points last month. Now the share of loans sold at the highest price remained the same at 79%. But that second tier, selling to the rank two execution, went from 11 % to 13%. And this is just suggesting that the eligibility exceptions and representative delivery mixes that lenders kind of think about during the loan sale process decreased as an attention point. So folks kind of shifting a little bit more on the periphery to

price and profit versus overall relationship management. Two other stats that I thought were super interesting kind of playing this larger theme of maybe more investor demand out there right now is we saw the average amount of investors included in a loan sale go from 12 investors to 14 investors. Now that's super interesting. It means that instead of showing your list of loans that are funded that you want to sell in the secondary market to 12 people, you're showing them to 14 people. That's a positive sign.

the industry, that means that there's more buyers out there agency paper. And that could lead to more profitability, which in fact could lead to lower rates if lenders, if that's sustainable and lenders can that on to the borrower, right? Higher price, higher profit, lower rate to the borrower. Another interesting trend on that same kind of touch point is we saw even despite rates decreasing, saw on average servicing rights went up about two basis points.

from a 1.14 to a 1.16 on a 25 basis point strip. So a 4.65 multiple, even though on average over the month, be my was down. Yeah. I think Brandon coded seven or eight basis points, but on average over the month, it was about 10 basis points. There's a couple of things to think about here. could be that demand for whole loans and servicing rights are just going up from the investor class. it also means that, you know, Hey, maybe folks are,

you know, tuning those dials a little bit more on servicing, maybe it means, you know, that people are investing in retention operations that can lead to higher pricing on servicing. And again, in all these kind of dynamics, more demand, more price increase, more value increase from an investment standpoint, means that's more profitability to the lender, and more like cushion for them to decrease their rate, but increase their profitability. So a positive story there to tell.

the secondary markets for January here start the year.

Optimal Blue (: 30:19

Good stuff. Yeah. It feels like lot of good tailwinds, maybe you know, firing on all cylinders right out of the gate, but a lot of reason for optimism here as we head into late winter and in early spring.

Mike (: 30:31

Yeah, I think the industry needs positivity still. I still think folks would have liked to see a little bit more of a decrease going into where we are in 2026 right now. But again, that five handle, I think is really, really important. I think there is a psychological threshold, but you think that if you pair in some buy downs, you pair in different types of products like arms, you start to get back to a point where, hey, that five and a quarter, that five and a half.

you know, if you buy down the rate a little bit, you use an arm product, that becomes way more palatable for the borrower. And I think really could unlock some things. any of that, any of the folks still kind of waiting behind that life event dam, if you can get to that five handle, that could get folks off the sidelines. So I think it'll be interesting to watch this month to see if we can keep inching closer to that five handle.

Optimal Blue (: 31:22

Yeah, completely agree. Supply and demand side too, right? Cause you got the buyer, but then you also have the lock-in effect. And I suppose some folks are going to look at their financing at their two and three quarters rate and say, I'm going to hold onto that house even if I'm moving. But I would say for the majority of folks, they're going to tap the equity or they're going to liquidate and sell that home, which will obviously open up more supply, which would be good for a lot of reasons too.

to come next month.

Mike (: 31:52

everybody. Talk to you next month.

Optimal Blue (: 31:53

Thanks all.

Jim Glennon (: 31:54

Okay, let's close this thing out. Thank you so much, Alex and James, for talking through some market dynamics with us today. Brennan and Mike, thank you so much for the Market Advantage preview. Next week's podcast will come out on Tuesday because of the President's Day holiday, so look for that. And that's it for today. Join us next week for another episode of Optimal Insights, where we'll continue to provide you with the latest market analysis and insights to help you stay ahead. Check out our full videos on YouTube.

You can also find this podcast on all major podcast platforms. Thanks again for tuning into Optimal Insights.