Company: CIMO
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001628280-25-023813
Chunk: 98

Company: CHIMERA INVESTMENT CORP
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 8
Chunk 98
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 estimated risk of a recession to be 45%, with expectations of reduced GDP growth and heightened inflation. The Federal Reserve maintained its target range between 4.25% and 4.5% during its March meeting, citing persistent inflation above the 2% target and heightened uncertainty due to new tariffs and global economic conditions.

The yields on two-year and ten-year U.S. Treasury notes each declined by thirty six basis points during the quarter reflecting investor concerns about potential economic slowdown. Since April 2, interest rate volatility increased alongside the ten-year U.S. Treasury which has traded in a 50 basis point range, highlighting concerns with respect to the effects of policy execution. 

Credit Spreads

Spreads on most credit products were wider throughout the first quarter. In Securitized Products spreads, the credit curve flattened, with yield hungry buyers providing substantial demand for mezzanine bonds which outperformed relative to their more senior parts of the capital structure. 

Residential credit performance continued to remain strong in the first quarter of 2025, driven by robust fundamentals given by low defaults, rising home prices and record levels of homeowners’ equity. Mortgage loan yields tightened across Non-QM and jumbo products during the quarter between 25 and 50 basis points. Securitized product spreads, however, were wider across securitizations backed by Non-QM and RPL collateral. Non-investment grade corporate bond spreads and yields were also wider during the quarter, while investment grade yields were tighter by approximately 18 basis points in the quarter. 

Housing Market

The spread between 30-year fixed mortgage rates and 10-year U.S. Treasury yields experienced notable fluctuations influenced by economic uncertainty and policy changes. The spread narrowed by fifteen basis points to 256 basis points over the 10-year Treasury in the first quarter. While mortgage rates decreased in early 2025, elevated credit spreads suggest that borrowing costs remained high compared to historical norms. Economic factors, including inflation concerns and policy uncertainties, contributed to this environment.

Home prices continued to rise modestly, with national year-over-year growth reported at approximately 3.9% as of February 2025.Despite modest price growth, elevated mortgage rates and high absolute levels of home prices continued to present affordability headwinds for would be homebuyers. In 97% of U.S. counties, median-priced homes were less affordable compared to historical averages. High mortgage rates and economic uncertainties led to cautious buyer behavior. Pending home sales in February dropped 3.6% year-over-year