The first full week gave market participants an opportunity to assess slew of incoming economic data. The most notable development was a policy proposal attributed to President Trump for Fannie Mae and Freddie Mac to purchase up to $200 billion of agency mortgage-backed securities to help keep long-term borrowing costs lower, though key details on timing and structure have yet to be released. Investors viewed the program as a proxy form of quantitative easing, as it reduces the supply of long-term mortgage bonds and places downward pressure on longer-term mortgage yields. Markets also monitored developments in Venezuela, which have yet to fully play out and have had limited market impact.

Against this policy backdrop, labor market data pointed to gradual cooling at year end rather than a sharp deterioration. Nonfarm payrolls increased by about 50,000 in December, subject to revision, while the unemployment rate edged down to 4.4%. Other indicators were mixed;  housing activity remained weak in October, with housing starts falling to a 1.246 million pace amid elevated prices and mortgage rates, while building permits weakened slightly as well.  The Institute for Supply Management reported the services index rose to 54.4 in December, the strongest reading in more than a year. while the Institute for Supply Management manufacturing index remained below the 50 threshold at 47.9, signaling ongoing softness in the industrial sector.

This week, a steady flow of geopolitical developments and economic data influenced financial markets. Bond yields were little changed over the week, with the 2-year Treasury yield at approximately 3.50% and the 10-year Treasury yield near 4.17%, reflecting a balanced outlook for growth and inflation. Corporate bond markets remained active, with US investment-grade bond issuance totaling roughly $90 billion across more than 50 issuers. Equity markets moved higher, along with oil prices which rose to over $59 per barrel amid developments in Venezuela. Gold prices were modestly higher, trading near recent highs.

Taken in aggregate, these developments point to steady economic growth with easing inflation pressures. Policy efforts to lower long-term borrowing costs, combined with resilient services activity and improving productivity support an environment in which bond yields remain contained. Against this backdrop, the Chandler team expects at least one additional Federal Reserve rate cut in 2026 and has positioned portfolios to benefit from a gradual steepening of the Treasury yield curve.

© 2026 Chandler Asset Management, Inc. An SEC Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and ADP. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.