CEO Robin Vince refused to comment on “rumors or speculation” about a potential merger between the custody banking giant and its smaller rival, Northern Trust. He also said that the bar for BNY to engage in M&A is “very high.”

House Financial Services Committee Chairman French Hill promised to begin combing through Dodd-Frank to find areas for deregulation, while the panel’s ranking member made it clear that Democrats would fight for the Consumer Financial Protection Bureau.

What’s Up With The Paradoxical CPI Reaction?

Heading into today’s data, we knew there was a possibility of two separate reactions–one for the top line CPI numbers and one for a deeper look at the internal components. Those internals show that tariffs are having an impact even though it was a smaller impact than many forecasters were expecting. Bonds didn’t seem to care at first. When a new glut of trades came online at the 9:30am NYSE open, that changed.  Both stocks and bonds sold off sharply starting at 9:30am and this move looks far more convincing that the initial rally.

Econ Data / Events

Core MM CPI

0.228 vs 0.3 f’cast, 0.1 prev

Core YY CPI

2.9 vs 3.0 f’cast, 2.8 prev

Headline MM CPI

0.3 vs 0.3 f’cast, 0.1 prev

Market Movement Recap

08:36 AM after CPI 10yr yields are down 2.9bps at 4.406 and MBS are up an eighth

09:45 AM 10yr unchanged 4.434. MBS also unchanged and down just over an eighth from the highs. 

11:29 AM weakness continues.  MBS down 6 ticks (.19) and 10yr up 4.7 bps at 4.482

02:32 PM Steady, slight selling continues.  MBS down 7 ticks (.22) and 10yr up 5.3bps at 4.488

Mortgage rates are based on bonds and bonds don’t like inflation.  When inflation reports are higher than the market expected, rates tend to rise, all other things being equal.   But today’s inflation numbers were a bit lower than the median forecast. This scenario is typically more likely to push rates lower.  Indeed, in the first hour following today’s Consumer Price Index (CPI) release, bond trading implied lower rates.  Then things changed.   Recall our closing reminder from yesterday which qualified the conventional wisdom reactions, saying “even then, traders will look into the underlying composition of the number and assess whether changes were driven by tariff-dependent categories. For example, if CPI comes in at 0.2, but it was due to a big shift in rental costs or health care, rates could still rise if tariff-dependent categories showed higher inflation.” This is essentially what happened. The “shelter” component of CPI (the one that measures housing costs and that has been stubborn in moving down as quickly as hoped) fell to its lowest monthly level since inflation first began soaring in 2021. This is great news for inflation in general and it contributed to the initial market reaction. Then the “yeah buts” showed up. At issue is the fact that tariffs are increasingly having an impact on certain CPI categories. Granted, it’s not enough to raise the overall price index above forecast levels, but the market decided it was enough to justify the Fed’s “wait and see” approach on rate cuts. Notably, today’s reaction in terms of the Fed rate cut outlook was far milder than the reaction after the jobs report 2 weeks ago, but this one is perhaps more frustrating because the headline inflation numbers suggested the opposite move for rates.

Here’s a cool password: 2 444 66666 8888888 9. (You can figure it out.) I’m no IT wizard, but some are. Do you want AI to open your emails and create drafts for you to reply to them? Fyxer does exactly that. Goldman Sachs is piloting an autonomous software engineer, Devin, from AI startup Cognition, marking a significant advancement in AI integration. Devin, capable of handling complex tasks with minimal human intervention, could soon join Goldman’s 12,000 developers, potentially scaling to thousands of AI engineers depending on use cases. I didn’t make the cut for Facebook, uh, Meta’s new “Meta Superintelligence Labs” group with their salaries in the eight-figure range. (For those of you who think in basis points, that’s north of $10,000,000 out of Mark Zuckerberg.) But everything isn’t peaches and cream. You have stories like, “OpenAI Hits the Panic Button.” While AI governance is a growing concern for financial services leaders, two recent surveys suggest there might be a knowledge and strategy gap at the board level. Nasdaq’s most recent Global Governance Pulse survey notes that board members were asked which skills and experience would expand their board’s composition and ensure alignment to the organization’s strategy, artificial intelligence and machine learning topped the list, according to. (Today’s podcast can be found here and this week’s are sponsored by Ocrolus. Ocrolus is transforming the mortgage industry with AI-powered data and analytics, featuring cutting-edge tools for automated indexing, income analysis, and discrepancy insights that empower underwriters to make timely, confident lending decisions. Hear an interview with Ocrolus’ Rebecca Seward on how Ocrolus is redefining mortgage underwriting with its Inspect platform, enabling real-time condition creation and automated loan reviews to improve quality, reduce costs, and streamline operations for lenders of all sizes.)

If market watchers get out their magnifying glasses, they can certainly find some evidence of tariffs impacting inflation in various goods, but those goods are such a small part of the overall CPI calculation that they didn’t account for any of this month’s higher inflation.  Rather, it was the usual suspects (housing, medical care, professional services) that did most of the damage of the damage. Bonds are certainly able to rally based on the fact that CPI came in below forecast, but bonds are just as certain to have second thoughts about that rally based on the persistence of non-tariff-driven inflation (housing alone accounts for almost half of inflation year over year).  The net effect is a fairly half-hearted rally that falls well short of launching yields triumphantly back toward recent lows.

The Office of the Comptroller of Currency said it will no longer include examinations for disparate impact liability but will still perform fair lending risk assessments on a regular basis.

Stocks have swung wildly on Pulte’s comments as he opines on everything from credit score pricing, to cryptocurrencies as mortgage assets, and even the job security of Federal Reserve Chair Jerome Powell.

The number of homes purchased by foreign buyers increased for the first time in 8 years, with many making all-cash purchases of vacation and rental homes.

Prosecutors said the defendant will pay back $13,784 in restitution for federal housing assistance he fraudulently obtained between 2019 to 2020.