Company: CIMO
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001628280-25-038345
Chunk: 163

Company: CHIMERA INVESTMENT CORP
Filing Date: 2025-08-06
Form: 10-Q
Item: Item 8
Chunk 163
---
 to growth and inflation. Geopolitical tensions in the Middle East and the ongoing conflict between Russia and Ukraine contributed toward market volatility. However, by the midpoint of the quarter, while 

48

overall uncertainty still remained, trade tensions began to ease and signs of de-escalation in geopolitical conflicts helped stabilize markets. 

Inflation remained contained, the labor market showed resilience, and the Federal Reserve held rates steady while emphasizing a data dependent policy stance. Treasury yields sold off through May and rallied going into quarter end. Corporate credit spreads were tighter with non-agency RMBS spreads ending the quarter slightly wider. Equity markets achieved new heights and liquidity markets remained constructive.

Despite the improved market sentiment, risks remained elevated with the consensus forecasts assigning a 35% to 40% probability of a recession. The Consumer Price Index rose 2.4% year-over-year in June 2025, unchanged from the levels recorded in April and May, while unemployment inched higher and wage growth moderated. With this backdrop, the data did not provide the catalysts necessary for the Federal Reserve to adjust its interest rate policy, which resulted in the target rate being maintained between 4.25% and 4.50% at both the April and June FOMC meetings.  

Interest rates rose throughout much of the second quarter before falling near quarter-end. Front-end yields declined while the back end of the curve remained steady, indicating that markets have started to adjust for potential rate cuts while leaving longer term rates subject to expectations surrounding U.S. growth, inflation, fiscal responsibility, and supply-demand dynamics in U.S. government debt markets. The yield on two-year Treasury notes fell by 16 basis points to 3.72%, while the yield on ten-year Treasury notes rose by 2 basis points to 4.23%. Meanwhile, interest rate volatility spiked in early April amid tariff fears, before reversing course and finishing the quarter lower overall.

Credit Spreads

Credit markets reflected a stable-to-positive risk sentiment in the second quarter. Nominal MBS spreads remained flat to slightly wider as volatility subsided and demand stabilized. Corporate spreads tightened by 16 basis points for investment grade and 67 basis points for high yield. In securitized products, the credit curve remained flat to modestly wider, supported by steady collateral performance and demand across the spectrum of investors.

Residential credit fundamentals remained solid, with low defaults, rising home prices, and historically high homeowner equity continuing to support strong performance and investor demand. 

Housing Market

Mortgage rates increased modest