Warsh Strikes Hawkish Tone at Jackson Hole as QCEW Reveals Weak Job Market Cautiously Floating
MBS rallies early then fades as Warsh strikes hawkish tone at Jackson Hole, QCEW reveals only 16,000 jobs/month, and PCE is masked by portfolio management fees. All eyes turn to Jobs Week.
30-Year Fixed
6.875%
15-Year Fixed
6.375%
Where We Are Now
The week was a rollercoaster. Monday opened with MBS up 19 bps, breaking above the difficult 25-day moving average, with the 10-year Treasury down 4-5 bps. FHFA home values showed resilience at +1.5% YoY and +2.7% in the past 4 months (NSA). However, new home sales plunged 10.5% to 607,000 annualized (-6.6% YoY), though June was revised up 50,000. ADP weekly jobs remained lackluster at 11,750/week (~50K/month). Tuesday brought PCE as expected (0.2% headline and core MoM), but the devil was in the details: portfolio management fees surged 5.62% MoM (+20% YoY), accounting for half of the core reading. Without this fictitious inflation, core PCE would be 2.9% YoY. Q2 GDP came in at 1.5% as expected, durable goods were strong (+1.1%), but the MBA showed purchases -5% YoY and refis -17% YoY. Wednesday revealed the Dallas Fed trim mean at 2.3% YoY, Warsh's preferred gauge, dramatically lower than headline PCE at 3.7%. ApartmentList rents were +0.1% MoM, -0.8% YoY (7th consecutive monthly increase, first August increase in 4 years), with vacancy dropping to 7.1%. Initial claims fell to 203,000. Thursday brought Warsh's hawkish Jackson Hole speech, non-committal on a hike but expressing inflation concern. Fed funds futures jumped to 48% chance of September hike (from 35%) and 100% chance of at least one hike this year. QCEW revisions revealed only 16,000 jobs/month over the past year (30% downward revision), with the private sector hit hardest (-178,000). Oil remains above $88/barrel on Iran tensions, with diesel up ~50% since the start of the war.
New Home Sales
Source: Census Bureau, FHFA. New home sales July: 607,000 annualized (-10.5% MoM), June revised +50K. FHFA home values +1.5% YoY, +2.7% in past 4 months (NSA). Median new home price ~$394,000 (-2.2% MoM due to mix shift toward lower-priced homes, 1/3 between $300-400K). ADP weekly jobs: 11,750/week (~50K/month). MBA purchases -5% YoY, refis -17% YoY, mortgage rate ~6.75%.
Inflation & Oil Pressure
Source: BEA, BLS, Dallas Fed, ApartmentList. PCE July: headline MoM 0.16% (annualized ~2%), core 0.24%. YoY headline 3.7%, core 3.3%. Portfolio management fees +5.62% MoM, +20% YoY, contributing 0.12 to core (half of core). Without portfolio mgmt: 2.9% YoY. Dallas Fed trim mean: 2.3% YoY, 0.18% MoM. CPI core 2.5%, Trueflation ~2.5%. ApartmentList rents +0.1% MoM, -0.8% YoY (7th consecutive monthly increase, first August increase in 4 years). Vacancy rate 7.1% (from 7.3%), list-to-lease 30 days (from 32).
30-Year Fixed
6.875%
15-Year Fixed
6.375%
10-Year Treasury
~4.66%
Inventory
4.6 months
MBS Technical Update, Week of August 31, 2026
The week opened with a rally, MBS up 19 bps on Monday, breaking above the difficult 25-day moving average. However, PCE on Tuesday revealed portfolio management fees accounting for half of core inflation, and Warsh's hawkish Jackson Hole speech on Thursday shifted the tone. MBS gave back gains, ending the week down 15 bps. The QCEW revisions revealed only 16,000 jobs/month over the past year (30% downward revision). The 10-year Treasury sits dead on the 25-day MA, and MBS is peeking just above the Fibonacci and 25-day MA - a clear battleground level. All eyes now turn to Jobs Week: JOLTS Tuesday, ADP Wednesday, BLS Friday.
MBS Floor
101.39
Fibonacci level and 25-day MA. Back tested this level mid-week and rebounded. Clear battleground level
MBS Resistance
50-Day MA
Next target above. MBS briefly broke above 25-day MA on Aug 25 (up 19 bps) but gave back gains. Need to sustain above 25-day MA
10-Yr Treasury
~4.66%
Sitting dead on the 25-day MA. Has been both above and below it. Bulls and bears duking it out after Warsh's mixed signals
Oil (WTI)
~$88/bbl
Still elevated on Iran tensions. Diesel up ~50% since start of war. Canada announcing reciprocal tariffs against U.S.
What Improved
- • MBS rallied 19 bps on Aug 25, breaking above the difficult 25-day MA
- • 10-year Treasury dropped below 25-day MA mid-week
- • PCE headline actually 0.16% (annualized ~2%)
- • Dallas Fed trim mean at 2.3% YoY, much lower than PCE at 3.3%
- • Q2 GDP second reading at 1.5% as expected
- • Durable goods orders +1.1% (ex aircraft/defense +0.2%)
- • Core shipments +1.4% (plugs directly into GDP)
- • FHFA home values +1.5% YoY, +2.7% in past 4 months (NSA)
- • ApartmentList rents -0.8% YoY (7th consecutive monthly increase)
- • Rental vacancy rate dropped to 7.1% (from 7.3%)
- • List-to-lease time down to 30 days (from 32)
- • Initial claims down 4,000 to 203,000
- • Continuing claims down 18,000, still ~1.8M
- • Income up 0.4%, savings rate bumped to 3% (from 2.6%)
- • BEA may adjust portfolio management methodology next month
- • MBS back tested Fibonacci and 25-day MA, resumed higher
- • Treasury buyback operations extended through November 4
- • 16M homes sold since Sept 2022 - future refi candidates
What to Watch
Next week: Jobs Week - JOLTS Tuesday, ADP Wednesday, BLS jobs report Friday. Estimates anemic at 45,000 job creations, unemployment expected to tick up to 4.2%
- • Warsh hawkish tone at Jackson Hole, non-committal on hike
- • Fed funds futures now 48% chance of September hike (up from 35%)
- • 100% chance of at least one hike this year
- • Beth Hammack (Cleveland Fed): time is now to hike
- • Warsh poo-pooed cooler summer inflation readings
- • Warsh thinks economy is strengthening, not restrictive
- • Portfolio management fees +5.62% MoM, +20% YoY (half of core PCE)
- • PCE YoY not expected to budge (3.7% headline, 3.3% core) until Nov/Dec
- • QCEW revisions: only 16,000 jobs/month (30% downward revision)
- • Private sector QCEW revision: -178,000
- • 700,000 people left labor force since May (why unemployment dropped)
- • New home sales down 10.5% MoM, 6.6% YoY
- • MBA purchases -5% YoY, refis -17% YoY
- • Savings rate still low at 3% (from 2.6%)
- • MBS gave back Aug 25 rally, down 15 bps on Aug 28
- • MBS at battleground level on Fibonacci and 25-day MA
- • 10-year Treasury dead on 25-day MA
- • Oil still above $88/barrel on Iran tensions
- • Diesel prices up ~50% since start of war (99% of land freight)
- • Canada announcing reciprocal tariffs against U.S.
- • Housing starts down 12%, permits down 5%
- • Pending home sales down 2.3% MoM
- • Corporate debt (AI buildout) competing for bond market liquidity
- • 30-year Treasury at multi-decade highs
Current Stance: CAUTIOUSLY FLOATING, MBS AT BATTLEGROUNDB ON 25-DAY MA, 10-YR DEAD ON 25-DAY MA, OIL ~$88/BBLMBS rallied 19 bps on Aug 25 breaking above the 25-day MA, but gave back gains ending down 15 bps on Aug 28 after Warsh's hawkish Jackson Hole speech. Fed funds futures now pricing 48% chance of September hike (up from 35%) and 100% chance of at least one hike this year. PCE was as expected but portfolio management fees accounted for half of core inflation. Dallas Fed trim mean at 2.3% tells a different story than PCE at 3.3%. QCEW revisions revealed only 16,000 jobs/month (30% downward revision), private sector -178,000. New home sales down 10.5% but FHFA home values +1.5% YoY, +2.7% in 4 months. 10-year sitting dead on 25-day MA. Jobs Week next week: JOLTS Tuesday, ADP Wednesday, BLS Friday. We're floating but on high alert, watching these technical levels closely.
The Trend: One Thing Leads to Another
The week was a rollercoaster. Monday opened with MBS up 19 bps, breaking above the difficult 25-day moving average, with the 10-year Treasury down 4-5 bps. FHFA home values showed resilience at +1.5% YoY and +2.7% in the past 4 months (NSA). However, new home sales plunged 10.5% to 607,000 annualized (-6.6% YoY), though June was revised up 50,000. ADP weekly jobs remained lackluster at 11,750/week (~50K/month). Tuesday brought PCE as expected (0.2% headline and core MoM), but the devil was in the details: portfolio management fees surged 5.62% MoM (+20% YoY), accounting for half of the core reading. Without this fictitious inflation, core PCE would be 2.9% YoY. Q2 GDP came in at 1.5% as expected, durable goods were strong (+1.1%), but the MBA showed purchases -5% YoY and refis -17% YoY. Wednesday revealed the Dallas Fed trim mean at 2.3% YoY - Warsh's preferred gauge - dramatically lower than headline PCE at 3.7%. ApartmentList rents were +0.1% MoM, -0.8% YoY (7th consecutive monthly increase, first August increase in 4 years), with vacancy dropping to 7.1%. Initial claims fell to 203,000. Thursday brought Warsh's Jackson Hole speech: hawkish but non-committal, expressing inflation concern without telegraphing a hike. Fed funds futures jumped to 48% chance of September hike (from 35%) and 100% chance of at least one hike this year. Beth Hammack said the time is now to hike. QCEW revisions revealed only 16,000 jobs/month over the past year (30% downward revision), with the private sector hit hardest (-178,000). The bond market would respond well to a hike, but it would damage an already weak economy.
"The bond market loves bad news. The bond market loves a recession. A rate hike would probably help mortgage rates come down, but not because you're actually bringing the rate down - because of the damage that you would do to an economy that's already showing there's not a whole lot of pricing power outside of these items."
Key Market Dynamics
Warsh Hawkish at Jackson Hole
Fed Chair Warsh delivered a more hawkish tone at Jackson Hole, expressing concern about inflation but remaining non-committal on a hike. He said if the Fed is not confident inflation is moving toward their goal, they have work to do. He poo-pooed cooler summer inflation readings, said economic conditions are not restrictive, gave nods to AI and healthy consumer demand, and recommitted to 2% as a firm target. He defended not wanting forward guidance and did not telegraph a path toward hiking. Fed funds futures jumped to 48% chance of September hike (from 35%) and 100% chance of at least one hike this year.
PCE Masked by Portfolio Management Fees
PCE came in as expected (0.2% headline and core MoM), but portfolio management fees surged 5.62% MoM and are up 20% YoY, contributing 0.12 to the core reading - half of the entire core. Without this fictitious inflation (stock market gains driving up fees), core PCE would be 2.9% YoY. The BEA may adjust this methodology next month. Audio/video/photo (AI chip demand) also contributed significantly. Shelter at 0.26% MoM (~3% YoY) is still overstated and coming down too slowly.
Dallas Fed Trim Mean Tells Different Story
The Dallas Fed trim mean, Warsh's preferred inflation gauge, came in at 2.3% YoY and 0.18% MoM (~2.2% annualized) - dramatically lower than headline PCE at 3.7% and core at 3.3%. The trim mean excludes the top 31% and bottom 24%, removing fuel, energy, transportation declines and portfolio management fees. CPI core at 2.5% and Trueflation at ~2.5% are much more aligned with the trim mean, suggesting PCE is an outlier.
QCEW Reveals Weak Job Market
QCEW revisions for Q1 2025 through Q1 2026 showed an additional drop of 79,000 jobs. The BLS originally reported 273,000 jobs over that period, but the revision leaves only 195,000 - about 16,000 jobs/month. The private sector was hit hardest with a -178,000 revision, while government was revised up. This follows last year's -900,000 revision. Additionally, 700,000 people have left the labor force since May, which is why the unemployment rate dropped to 4.1%.
New Home Sales Plunge but FHFA Shows Resilience
New home sales plunged 10.5% in July to 607,000 annualized, below estimates. June was revised up 50,000, making the miss look worse. Sales are down 6.6% YoY. Median home price dropped 2.2% to ~$394,000 due to mix shift (1/3 of sales between $300-400K, many in the South). However, FHFA home values continue to appreciate: +1.5% YoY and +2.7% in the past 4 months (NSA), showing resilience despite elevated rates.
Where We're Going
All eyes now turn to Jobs Week next week: JOLTS on Tuesday, ADP on Wednesday, and the big BLS jobs report on Friday. Estimates are anemic at 45,000 job creations, with the unemployment rate expected to tick up from 4.1% to 4.2%. Given the QCEW revisions showing only 16,000 jobs/month, the labor market is vulnerable. Warsh's hawkish tone at Jackson Hole has shifted expectations, with Fed funds futures now pricing 48% chance of a September hike (up from 35%) and 100% chance of at least one hike this year. However, if Jobs Week data is weak, those odds could shift quickly. The 10-year Treasury is sitting dead on the 25-day MA, and MBS is just peeking above the Fibonacci and 25-day MA - a clear battleground level. A rate hike would likely help mortgage rates come down, but for the wrong reasons - by damaging an already weak economy and labor market. We are floating but on high alert, watching these technical levels closely.
Positive Catalysts
- MBS rallied 19 bps on Aug 25, breaking above 25-day MA
- 10-year Treasury dropped below 25-day MA mid-week
- PCE headline actually 0.16% (annualized ~2%)
- Dallas Fed trim mean at 2.3% YoY, much lower than PCE
- Q2 GDP second reading at 1.5% as expected
- Durable goods orders +1.1% (ex aircraft/defense +0.2%)
- Core shipments +1.4% (plugs directly into GDP)
- FHFA home values +1.5% YoY, +2.7% in 4 months (NSA)
- ApartmentList rents -0.8% YoY (7th consecutive monthly increase)
- Rental vacancy rate dropped to 7.1% (from 7.3%)
- List-to-lease time down to 30 days (from 32)
- Initial claims down 4,000 to 203,000
- Continuing claims down 18,000
- Income up 0.4%, savings rate bumped to 3%
- BEA may adjust portfolio management methodology next month
- MBS back tested Fibonacci and 25-day MA, resumed higher
- Treasury buyback operations extended through November 4
- 16M homes sold since Sept 2022 - future refi candidates
Risk Factors
- Warsh hawkish tone at Jackson Hole, non-committal on hike
- Fed funds futures now 48% chance of September hike (up from 35%)
- 100% chance of at least one hike this year
- Beth Hammack (Cleveland Fed): time is now to hike
- Warsh poo-pooed cooler summer inflation readings
- Warsh thinks economy is strengthening, not restrictive
- Portfolio management fees +5.62% MoM, +20% YoY (half of core PCE)
- PCE YoY not expected to budge (3.7% headline, 3.3% core) until Nov/Dec
- QCEW revisions: only 16,000 jobs/month (30% downward revision)
- Private sector QCEW revision: -178,000
- 700,000 people left labor force since May
- New home sales down 10.5% MoM, 6.6% YoY
- MBA purchases -5% YoY, refis -17% YoY
- Savings rate still low at 3% (from 2.6%)
- MBS gave back Aug 25 rally, down 15 bps on Aug 28
- MBS at battleground level on Fibonacci and 25-day MA
- 10-year Treasury dead on 25-day MA
- Oil still above $88/barrel on Iran tensions
- Diesel prices up ~50% since start of war
- Jobs Week next week: estimates anemic at 45,000 creations
- Unemployment rate expected to tick up to 4.2%
- Canada announcing reciprocal tariffs against U.S.
- Housing starts down 12%, permits down 5%
- Pending home sales down 2.3% MoM
- Corporate debt (AI buildout) competing for bond market liquidity
- 30-year Treasury at multi-decade highs
Current Stance
With rates still elevated around 6.75-6.875%, focus on cash-out refinances for debt consolidation, even for borrowers in the 3% range. Home equity is substantial given appreciation (+1.5% FHFA YoY, +2.7% in 4 months). Rate-and-term refis remain weak (-17% YoY), but cash-out refis present opportunities. Watch the debt consolidation webinar in Barry's Insights. Strike rates must be sharp - MBS is at a battleground level on the 25-day MA and Fibonacci.
Today's Rates
As of September 1, 2026, subject to change without notice
Rates are for informational purposes only and subject to change without notice. APR includes fees. Contact your loan officer for a personalized quote.
Bottom Line
MBS rallied early in the week (up 19 bps on Aug 25) but gave back gains, ending the week down 15 bps. Warsh's hawkish Jackson Hole speech shifted the tone, with Fed funds futures now pricing 48% chance of a September hike (up from 35%) and 100% chance of at least one hike this year. QCEW revisions revealed only 16,000 jobs/month created over the past year (30% downward revision), with the private sector hit hardest (-178,000). PCE was as expected but portfolio management fees accounted for half of core inflation. The Dallas Fed trim mean at 2.3% tells a very different story than headline PCE at 3.3%. New home sales plunged 10.5% but FHFA home values continue to appreciate (+1.5% YoY, +2.7% in 4 months). We are floating but on high alert, watching the 25-day MA battleground on both MBS and the 10-year Treasury.
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