Cool Inflation & Hot Takes

[Andrew Postell]

Good morning – a lot of headlines to breakdown! Inflation surprised sharply to the downside, with November Core CPI rising just 2.6% year-over-year versus the 3.0% consensus, marking the lowest annual pace since March 2021. Headline CPI also undershot expectations at 2.7% YoY, reinforcing the narrative of easing price pressures. On a two-month basis, core CPI gained only 0.159%, translating to modest monthly increases of roughly 0.08% in October and November. Core goods inflation slowed dramatically, posting its smallest uptick since May’s decline, while headline CPI registered back-to-back monthly drops of 0.10%. Taken together, this is a meaningful disinflationary signal that strengthens the case for a more dovish Fed stance in early 2026.

Labor data added another layer of stability. Initial jobless claims printed at 224,000 for the week ending December 13, in line with expectations and down from the prior week’s 237,000. The four-week moving average held steady at 218,000, and continuing claims ticked up to 1.897 million—slightly below forecast but higher than the previous week. These figures suggest the labor market remains resilient despite seasonal fluctuations, giving policymakers room to weigh inflation progress against employment strength before making their next move.

Markets responded decisively. Treasuries extended their rally, with the 10-year yield slipping to 4.10% and the front-end outperforming as two-year yields fell to 3.43%. Mortgage-backed securities followed suit, trading 5-7 ticks higher as rate volatility eased and sentiment improved. With inflation cooling and jobless claims steady, risk assets should find support, though year-end liquidity remains a watchpoint.

Turning to industry news, the recent TWO acquisition has sparked plenty of chatter, but let’s be clear: this is not a borrower-retention play in the mold of Rocket’s partnership with Mr. Cooper. The broker-driven model lacks customer-facing distribution and does not engage in borrower marketing or true recapture strategies. Any narrative suggesting this creates retail-style synergy is pure fiction. At best, the broker channel offers soft, indirect retention—not the retail closed-loop model, which is all the rage right now!

The real story here is Servicing economics and balance sheet optimization. This move is about securing stable servicing cash flows to offset origination volatility, creating a natural hedge against falling rates, and improving capital markets flexibility —after all, Pontiac isn’t exactly crawling with portfolio managers. Most of the projected $150 million in synergies come from cost efficiencies—servicing operations, financing, hedging, and tech rationalization—not borrower magic. Bottom line: this is insurance, not growth. In a volatile mortgage cycle, that’s rational for stability, but let’s not pretend it’s exciting.

https://www.investopedia.com/retiring-with-1-million-is...

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