- Rates: Treasury and SOFR swap rates rose sharply again this week, led by the long end of the curve. The move appears to reflect persistent inflation concerns, a hawkish policy outlook, and greater Treasury supply rather than a material shift in expectations for near-term tightening. The larger increase in long-dated Treasury yields relative to swaps also points to higher term premiums.
- Valley National Bank Agrees to Acquire Fintech Bluevine for $340mm: Valley is one of the few banks to pull the trigger on the core deposit funding challenge, using acquisitions to add deposits, engineering talent and AI capability at once. It agreed to acquire small-business fintech Bluevine in a cash-and-stock deal valued at $340 million. Bluevine brings ~$2.1B of low-cost deposits, which Valley plans to use to replace brokered funding, and 175,000 small-business customers (20x Valley’s base). It also brings ~180 R&D employees and engineers, and most of its new code is AI-generated. The pending $247 million Providence Bank & Trust deal adds ~$1.4B more, bringing the combined total to nearly $3.5B of core deposits. Practical innovation can be built organically or bought, and Valley chose to buy.
- Bank of America to Double AI Spending: Bank of America is doubling its AI budget next year as the spending appears to be paying for itself. The bank spent $400mm on 140 use cases and reportedly generated $800mm in benefits. Software development shows the clearest returns, according to Co-President Jim DeMare, with the bank’s 20,000 developers seeing 15-20% productivity gains. Its virtual assistant, Erica, handles work equivalent to 11,000 people and has cut help desk inquiries. Overall headcount also fell from 213,000 to 209,000 through attrition, with no layoffs, CEO Brian Moynihan noted.
- Consumer Sentiment Plunges as Treasury Yields Hit 22-Year Highs: Weaker consumers and rising yields are squeezing banks from both sides. Consumer optimism fell to its lowest level since 2014 on fears over prices and jobs. The 30-year Treasury yield hit its highest level since 2002 amid persistent inflation and fiscal concerns. Global debt topped $365T, and economists warn of a “vicious cycle.” Banks now face rising funding costs, deposit competition and weaker consumer confidence at once.
Rate Curves
