There’s something for everyone in this morning’s CPI data. The monthly headline was on target at 0.2 vs 0.2. Same story for the core at 0.3 vs 0.3. Bonds are just a hair stronger, but it’s hard to make a case that they should be based on other internals:

The unrounded monthly core was 0.322 versus the median big bank forecast at 0.31
Supercore (core CPI excluding housing) was 0.481 vs 0.212 previously
Core goods (tariff sensitive) is now 1.2% year over year – highest since June 2023

All these bullet points argue for bonds to be selling off today and likely justify the backpedaling in the initial rally.  Bonds are still modestly green on the day, but right in line with yesterday’s range. It wouldn’t be a surprise to see gains continue to erode as markets digest the implications.

“Nothing refreshes my memory about what I need at the grocery store like coming home from the grocery store.” Remember adjustable-rate mortgages? Here at the California MBA’s Western Secondary, talk in the hallways is about memories of how, in the past, just because the Fed changes short-term rates doesn’t mean long-term rates move. Put another way, short-term rates impacting adjustable-rate mortgages may improve while 30-year mortgage rates barely budge. It will be one of the topics in today’s episode of Capital Markets Wrap at 3PM ET. The panel delves into the increase in ARM volume, anticipated IPOs of Fannie Mae and Freddie Mac, and discusses how upcoming changes at the Federal Reserve could shape future policy. They’ll also highlight the significance of the September Fed meeting and share takeaways from the Western Secondary conference. Yes, Bill Ackman, who controls a large block of Freddie & Fannie stock and who has the President’s ear, not only wants another issuance of stock but also to merge F&F. Will borrowers really be helped? Our business continues to watch what could be the likely resolution that will mark the final and most lucrative chapter of the 2008 financial crisis: a successful recapitalization and return to private ownership of Fannie Mae, to the hoped-for benefit of taxpayers, homeowners, and shareholders alike. (Today’s podcast can be found here and this week’s is sponsored by ICE. By seamlessly integrating best-in-class solutions, ICE optimizes every stage of the loan life cycle, setting the standard for innovation, artificial intelligence, efficiency, and scalability, and defining the future of homeownership. Today’s has interview with ICE’s Matt Dowd on the borrower decision-making process and strategies for guiding them from lead generation to closing, including how balancing automation with human touchpoints creates a seamless, trust-building experience.)

Pundits, politicians, and everyone else can continue to assume that mortgage rates will respond to changes to the Fed Funds Rate. Meanwhile the bonds that actually dictate mortgage pricing will continue responding to the most important economic reports. The two biggest examples are the monthly jobs report and today’s release of the Consumer Price Index (CPI). To be fair to those who are overly-focused on the Fed, there is a correlation between this data and the Fed’s decision-making process.  In other words, today’s rates were at risk of moving higher or lower for the same reasons that the Fed might be more or less likely to cut rates in September.  The Fed attempts to balance unemployment and inflation, in not so many words. Today’s CPI showed that inflation has yet to fall decisively enough to guarantee a rate cut. On the other hand, it didn’t rise enough to take a rate cut off the table. In short, CPI was mixed. Some components showed tariff impacts and a costlier services sector. Other components showed ongoing softening in major categories such as housing-related expenses. The odds of a Fed rate cut actually improved for September. Shorter-term bonds also improved (no surprise, as they are highly correlated with Fed rate expectations).  But longer-term bonds (which includes the bonds that dictate mortgage rates) held steady.  When this is the case, mortgage rates will almost always be roughly unchanged on the day.

As mortgage rates dip, more homeowners are turning to cash-out refis for quick access to cash, ICE says.

Second quarter earnings at the nation’s largest title underwriters, while mostly positive, were still affected by the rather weak purchase season this year.

Federal Trade Commission data shows scam losses for adults 60+ have skyrocketed, with banks under pressure to strengthen protections.

Centerbridge Partners’ acquisition of MeridianLink comes amid sluggish originations but rising demand for AI tools.

A regulator has circulated an ideal picture of a public GSE offering from President Trump’s social media. Here’s what analysts think the reality would be.

About 25 miles to the north of the California MBA’s Western Secondary, a mobile robotic microfactory is building fire-resistant homes in Palisades Fire burn zone. The repercussions of disasters is certainly a topic here in the hallways here at the conference, along with the eventual fate of Freddie Mac and Fannie Mae (which may include merging them… follow the money: both have enormous backing from hedge fund investors, so much of the proceeds of a stock offering would go to wealthy financial backers, not taxpayers). Tech is also always a topic… AI in the capital markets? Yup: Sun West Mortgage Company, Inc. (SWM) and its affiliate Celligence International, LLC, creators of the advanced AngelAi technology, set up Sun West Investments Trust (SWIT) and a strategic expansion of AI-powered mortgage-backed assets into international markets, beginning with Japan. (Today’s podcast can be found here and this week’s is sponsored by ICE. By seamlessly integrating best-in-class solutions, ICE optimizes every stage of the loan life cycle, setting the standard for innovation, artificial intelligence, efficiency, and scalability, and defining the future of homeownership. Today’s has an interview with Better.com’s Kevin Ryan on how companies are driving growth and operational momentum through AI adoption, channel expansion, and fintech product innovation.) Products, Services, and Software for Lenders and Brokers On today’s episode of Now Next Later at 10am PT, Sasha and Jeremy are joined by Christy Soukhamneut, Chief Lending Officer at UFCU, for a conversation about the shifting credit landscape. They explore how lending strategies are evolving, what’s driving credit modernization, and what financial institutions can do to stay competitive.

The average top tier 30yr fixed rate held exceptionally steady last week after moving just a bit lower over the weekend. By comparison, today’s rates are much closer to Friday’s latest levels and still very close to the lowest we’ve seen since October, 2024.  If the two key economic considerations for interest rates are jobs and inflation, the two key economic reports are the jobs report seen earlier this month and the Consumer Price Index which comes out tomorrow morning. It’s often repeated that the PCE Price Index is a preferable gauge of inflation, but CPI comes out 2 weeks earlier and thus gets most of the market’s attention. Just like last month, market participants are watching to see the extent of tariff-driven inflation in tomorrow’s data.  If it contributes to a higher-than-expected result, we’ll likely see some upward pressure on rates.   Notably, traders are already expecting an increase over last month, so it won’t be “news” to interest rates if inflation is merely higher (the expectation is baked-in to current levels).  Bottom line, volatility potential is higher tomorrow morning due to the inflation data and there’s no way to know if it will help or hurt until the market is already reacting.