Member Services Desk Weekly Market Update

This MSD Weekly Market Update reflects information for the week ending January 16, 2026.

Economist Views

THIS WEEK'S ECONOMIC CALENDAR HIGHLIGHTS
Date Time	Event	Period	Survey	Prior
1/20/26 8:15	ADP Weekly Employment Change	3-Jan	--	11.750k
1/21/26 8:30	Building Permits	Nov P	--	1,411k
1/21/26 10:00	Pending Home Sales MoM	Dec	--	3.30%
1/22/26 8:30	GDP Annualized QoQ	3Q T	4.30%	4.30%
1/22/26 8:30	Initial Jobless Claims	17-Jan	--	198k
1/22/26 8:30	Continuing Claims	10-Jan	--	1,884k
1/22/26 8:30	Personal Income	Nov	0.40%	--
1/22/26 8:30	Personal Spending	Nov	0.50%	--
1/23/26 9:45	S&P Global US Manufacturing PMI	Jan P	--	51.80
1/23/26 10:00	U. of Mich. Sentiment	Jan F	54.00	54.00

The past week offered a series of inflation-related releases that were largely uneventful but revealed metrics that were still above the Fed’s 2% target. Other data, meanwhile, leaned towards being slightly better than expected. Retail sales, for instance, registered at resilient levels. Given the past week’s data and last Friday’s “okay” employment situation report, the dye seems cast for a Fed pause on rates at the January 28th FOMC. The upcoming holiday-shortened week serves a steady set of generally second-tier economic data which is unlikely to alter this status. Another potential highlight could be a Supreme Court decision on the International Emergency Economic Powers Act (IEEPA) tariffs. If declared illegal, market strategists cite the potential for a rise in long-term yields and a curve steepening move, as tariff reimbursements could act as a stimulus. But reaction may be muted, since many tariffs could potentially be reimposed via alternative authorities.

ADP Weekly Employment Change: The data will provide a view of private payroll growth to start the year and follows a modest 11.75K increase to finish 2025.

MBA Mortgage Applications Report: The first full week of the year posted a 28.5% rise in the index, assisted by a dip in rates and deceleration in home price increases, and so the reading will provide insight on the sustainability of higher activity.

Building Permits: This dataset for November 2025 will be a delayed report from the Census Bureau.

Pending Home Sales: Following November’s M-o-M and Y-o-Y readings of 3.3% and -.3%, respectively, the December reading will provide fresh perspective on any potential positive momentum into the new year.

Gross Domestic Product (GDP) Report: The third estimate is expected to match the prior 4.3% Q-o-Q annualized rate, thereby further confirming last year’s rebound from a dip in Q1-2025. 

Initial & Continuing Jobless Claims: Claims have stabilized within a non-worrisome range, with the past week posting a 17K decline from the week prior. Continuing Claims remain elevated and symbolic of a less dynamic labor market, but they managed to register a 13K decline this past week.   

Personal Income & Spending Report: The report from the Bureau of Economic Analysis will provide data for November. Due to its delayed release, it is unlikely to spur much market reaction. The Personal Consumption Expenditure (PCE) components will nonetheless be assessed by economists, given that the PCE deflator is the Fed’s preferred measure of inflation. 

S&P Global US Purchasing Manager Index (PMI) Report: The preliminary, aka “flash”, manufacturing, services, and composite data will be released for January. It is likely that the manufacturing sector depicts weakness vs. services, per past data and other sources.

University of Michigan Sentiment Report: The final dataset for January will provide a year-opening snapshot of consumer sentiment regarding economic conditions and inflation expectations.

Federal Reserve Bank Member Appearances:

• 1/16/2026 11:00  Fed Vice Chair Bowman speaks on economy and monetary policy at New England Economic Forum
• 1/16/2026 15:30  Fed Vice Chair Jefferson speaks on economy and monetary policy at American Institute for Economic Research
• 1/17/2026            Fed’s external communications blackout begins before the January 28th FOMC decision.

UPCOMING WEEK'S US TREASURY AUCTIONS
Bills	Offering Amount	Auction Date -- Settle Date
4-Week; 8-Week	95 Bln; 90 Bln	1/22 -- 1/27
13-Week; 26-Week	89 Bln; 77 Bln	1/20 -- 1/22
6-Week	85 Bln	1/20 -- 1/22
52-Week	50 Bln	1/20 -- 1/22
TIPs	Offering Amount	Auction Date -- Settle Date
10-Year	21 Bln	1/22 -- 1/30
Bonds	Offering Amount	Auction Date -- Settle Date
19-Year 10-Month	13 Bln	1/21 -- 2/2

 

Key Market Trends

Source: Bloomberg. The past week witnessed a few datasets portraying improvement in the housing sector. For instance, both new and existing home sales data proved better than expected, with the latter’s December tally registering its biggest M-o-M gain in two years. Granted, that gain marked a better finish to an overall poor 2025. But pent-up demand, price rise deceleration, and lower rates appear to have sparked some life into the sector. As seen here, mortgage rates have reached a multi-year low, and the Mortgage Bankers Association (MBA) index, driven by both refinancings and new applications, posted a hefty spike for the first full week of 2026. As we noted last week, low market volatility has helped drive MBS spreads lower, and this has fed through to end-user mortgage rates. Moreover, last week’s announcement by the Administration for Fannie and Freddie to purchase $200bn of MBS also helped to tighten MBS spreads by ~15 bps in the past week.

Source: Bloomberg. Top pane is yield (LHS, %); bottom pane is change (LHS, bps). As of Thursday afternoon, the UST term curve was flatter from a week ago. The 2- and 5-year rose by ~7 and 3 bps, respectively, whereas the 10-year was virtually unchanged, and the 30-year declined by ~5 bps. The range-trading theme of the past month continued this past week. Indeed, the trailing 30-day range on the UST 10-year yield has been the narrowest since 1972! Providing a bit of upward pressure on yields again this week was corporate bond issuance which has turned notably upward to start the year. Meanwhile, without status-altering data, the market has severely trimmed the odds of a Fed ease this month and has pared expectations for 2026. As of Thursday afternoon, the market prices the chance of a 25-bps January Fed ease at ~4%, or 7% lower than a week ago. The market’s end-2026 forward is ~3.174%, or 9 bps higher than a week ago and which equates to just shy of two 25-bps rate cuts for the year.

Source: FHLB-NY. As covered in last week’s edition, volatility, both realized and that implied in options pricing, is at 4-year lows. This dynamic has helped to tighten MBS spreads, as mentioned above. It also has served to enhance the pricing of option-embedded products in which the option is being purchased. For instance, pricing on our Callable Advances has markedly improved in recent months. As a refresher, the Callable is a fixed-rate advance in which the member owns the right to cancel (i.e., prepay with no fees) the advance at pre-determined dates (either “European, 1-time” or “Bermudan, quarterly”) in the future. Shown here is the rate difference, which basically represents the cost of the option, on a 5-year No-Call 1-year Bermudan Callable Advance relative to a standard 5-year bullet advance. At ~65 bps, the cost has plunged from ~90 back in the summer of last year. The Callable advance can be a tool to manage interest rate and prepayment risks.

Source: FHLB-NY. We also offer advances with embedded interest rate caps and floors, both in floater (“ARC”) format and embedded in our fixed-rate advances as well. These products can be helpful for asset and liability management and hedging of rate risk. Given the flat yield curve and low implied volatility, caps remain particularly inexpensive in the current environment. Shown here is the cost, in bps per annum terms (i.e., the spread that would be added to an advance coupon), for 5 and 6% strike caps. A high-strike cap, at modest cost, can be an efficient way to hedge stress tests and/or to obtain leverage to higher rates. Please contact us to discuss and learn more on any of the above products.

FHLBNY Advance Rates Observations

Front-End Rates

• As of midday Thursday, short tenors were higher by 2 to 5 bps from the week prior, with 3-month-and-out leading the move. The market pared back and pushed out the timeline on its pricing of potential Fed rate cuts this year. Meanwhile, after being negative for the past six weeks, net T-bill supply is slated to turn positive again next week and beyond. In turn, on Thursday, our paper widened a touch from prior notably tight levels. However, GSE funds are due to be parked in the short-end markets next week prior to MBS payments on the 25th, and so pressures in the short-end and on SOFR should be limited. Moreover, Fed purchases of T-bills via MBS portfolio principal reinvestments and its Reserve Management Purchases program have clearly added stability to financing markets. Money Market Fund AUM, meanwhile, remains at high levels and has absorbed T-bills and repo demand and thereby benefited our FHLB issuance levels.
• The markets will closely assess the data due this upcoming week, while also monitoring any Supreme Court decision on tariffs. A strike-down of tariffs could potentially add upside risk to net T-bill issuance, assuming tariff revenues needed to be refunded.

Term Rates

• The longer-term curve, as of Thursday afternoon and generally mirroring the moves in USTs and swaps, was flatter from a week ago. The 2- and 5-year were 7 and 3 bps higher, respectively, but the 10-year fell by a bp. Kindly refer to the previous section for color on market dynamics and changes.
• On the UST term supply front, the upcoming week serves a 20-year nominal and a 10-year TIPS auction. Note that UST auctions usually occur at 1pm and can occasionally spur volatility around that time. Please contact the Member Services Desk for further information on market dynamics, rate levels, or products.