Company: ADAMM
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001273685-25-000028
Chunk: 235

Company: ADAMAS TRUST, INC.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 235
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 to reduced cash flows from and/or valuation declines for multi-family and single-family rental properties, and in turn, many of the multi-family investments and single-family rentals that we own.

Credit Spreads. Investment grade and high-yield credit spreads both tightened over the course of the fourth quarter of and full year 2024. At the end of 2024, investment grade spreads tightened 10 basis points and 22 basis points as compared to the start of the fourth quarter of 2024 and the start of 2024, respectively. At the end of 2024, high-yield credit spreads tightened 11 basis points and 47 basis points as compared to the start of the fourth quarter of 2024 and the start of 2024, respectively. Tightening credit spreads generally increase the value of many of our credit sensitive assets, while widening credit spreads tend to have a negative impact on the value of many of our credit sensitive assets.

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Financing Markets. For the first time since June 2022, the Treasury curve uninverted at the end of August 2024, marking the end of the longest inverted Treasury curve on record. This normalization of the Treasury curve was driven in part by investors’ expectations of the Federal Reserve’s cuts to the target range for the federal funds rate. Inversions and subsequent normalizations of this spread are generally considered to be indicators of a recession in the near term, although some market commentators have cautioned against August 2024’s uninversion being such an indicator. Further, a January 2025 survey of economists by the Wall Street Journal indicated that the respondents believed that the probability of a recession in the next twelve months is at 22%, the lowest probability indicated by the Wall Street Journal’s survey since January 2022. On December 31, 2024, the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield closed at 33 basis points, as compared to a negative 35 basis point spread on December 29, 2023. This spread is important as it is indicative of opportunities for investing in levered assets. Increases in interest rates raise the costs of many of our liabilities, while overall interest rate volatility generally increases the costs of hedging and may place downward pressure on some of our strategies.

Monetary Policy and Recent Regulatory Developments. The Federal Reserve took a number of actions to stabilize markets during the COVID-19 pandemic. From March 2020 until March 2022, the Federal Reserve implemented an