Company: CIMO
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001628280-25-006426
Chunk: 104

Company: CHIMERA INVESTMENT CORP
Filing Date: 2025-02-19
Form: 10-K
Item: Item 1A
Chunk 104
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.1% increase from October 2023 to October 2024. 

Meanwhile, real GDP in the U.S. grew at an annualized rate of 2.3% in the fourth quarter of 2024. Labor market conditions remained tight throughout the year, with the unemployment rate fluctuating between 3.7% and 4.2%.

The Federal Reserve kept the federal funds rate in a target range of 5.25% and 5.50% through the first three quarters of 2024. The Federal Reserve then lowered the target federal funds rate by one hundred basis points between September and year-end. Long-term interest rates did not react to the federal funds rate cut as expected.  In each of the previous seven cutting cycles since the 1980s, the 10-year Treasury rate decreased after a Fed rate cut.  In 2024, the 10-year Treasury yield had decreased to 3.62% from a high of 4.70% in April only to spike back up to 4.63% by year-end after the Fed rate cuts. During the fourth quarter of 2024, the term premium for 10-year Treasuries increased by 75 basis points, which means the 10-year Treasury rate increased an additional 75 basis points over the rate change based on changing Fed expectations. We believe this increase in the term premium reflects the market’s uncertainty about future rates.

Credit Spreads

41

Residential credit performance was strong in 2024, driven by robust fundamentals given low defaults, rising home prices and record levels of homeowners’ equity. In addition, Non-Agency RMBS gross issuance ended at approximately $137 billion, almost doubling from 2023 issuance levels of $71 billion. Investor demand was very strong, and credit spreads tightened in 2024, especially at the bottom of capital structure, with the credit curve flattening significantly.  

While credit spreads in the residential market tightened significantly in 2024, they continue to remain attractive relative to the investment grade and high yield corporate bond markets. We believe market conditions align well with our residential credit strategy.

Housing Market

As discussed earlier, interest rates experienced volatility during the year and that was reflected in mortgage rates. According to Freddie Mac, the average 30-year fixed mortgage rate started the year at 6.62% and ended the year at 6.85%, representing an increase of twenty-three basis points. However, mortgage rates were volatile throughout 2024 and peaked at 7