Markets React To Consequential Announcements

The first month of 2026 included multiple announcements consequential for the bond market and financial markets as whole.

President Trump and his team proposed multiple policy efforts aimed at improving affordability ahead of the midterm elections later this year, including a one-year 10% cap on credit card interest rates, a ban on institutional homebuying, and a $200 billion mortgage-backed securities (MBS) purchase program by Fannie Mae and Freddie Mac (FMs).

The credit card interest rate cap is perhaps the most controversial given the potential negative consequences on credit availability. However, market participants were relieved when President Trump suggested he would rely on Congress to pass a law to cap such rates, which is considered a less likely outcome.

On Jan. 8, Trump directed Fannie Mae and Freddie Mac to purchase $200 billion of MBS with the ultimate objective of driving mortgage rates lower. The administration has provided limited details, but it’s worth noting that the FMs had been buying MBS for several months, most recently at a pace of around $16 billion per month, an annualized amount of nearly $200 billion. The most recent disclosures showed the FMs bought $24.6 billion in December.

Agency MBS spreads tightened on the news, with 30-year conventional coupons trading closest to a par dollar price (e.g., 30-year 4.5% and 5.0% pools) moving the most (10 to 15 basis points versus Treasuries). However, in a typical “buy the rumor, sell the fact” trade, spreads retraced approximately half of that move during the remainder of the month, particularly after Bill Pulte, the director of the Federal Housing Finance Agency, said there would be no increase to the total purchase program size of $200 billion.

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Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

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