Company: AOMN
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0001766478-25-000042
Chunk: 80

Company: Angel Oak Mortgage REIT, Inc.
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 2
Chunk 80
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 bonds, including risk retention securities, that are retained after securitizing the underlying loan collateral.

Trends and Recent Developments

Overall macroeconomic environment and its effect on us

The first quarter of 2025 continued with 2024’s trend of stability with decreases in expected rate and inflation paths, which created a constructive environment for our areas of business. The U.S. Federal Reserve Bank (the “Fed”) held the federal funds rate unchanged at 4.25 - 4.50% in the first quarter of 2025. Securitization markets were resilient, contributing to a productive business backdrop. However, toward the end of the first quarter, a new driver of uncertainty emerged in the form of new tariffs and resulting international trade disruption, which drove volatility across equity and fixed income markets. The future outlook remains uncertain as market participants wait to see the new global and domestic economic outlook in light of real and potential tariff activity.

Treasury yields experienced decreases across two, five, and ten-year terms in the first quarter of 2025. The two-year Treasury yield decreased by approximately 36 basis points since the end of 2024 to 3.95%, the five-year Treasury yield decreased by approximately 43 basis points since the end of 2024 to 3.96%, and the ten-year Treasury yield decreased by approximately 37 basis points since the end of 2024 to 4.21%.  Each of the two, five, and ten-year Treasury yields finished the first quarter near the minimum rate observed over the course of the quarter, with the maximums occurring toward the beginning of the first quarter.

30 year fixed residential conforming mortgage rates decreased by 20 basis points over the course of the first quarter to 6.65% as of the end of the first quarter from 6.85% as of the end of 2024. These rates, alongside federal funds rate and Treasury yields, are key benchmarks for the valuation of our portfolio, and a decrease will generally drive a corresponding positive impact to our asset pricing, as we observed in the first quarter of 2025. As such,we observed a 77 basis point increase in the weighted average price of our residential whole loans portfolio and a 94 basis point increase in the weighted average price of our loans in securitization trusts portfolio versus the prior quarter. Continued purchases of high-quality non-QM loans are also expected to contribute to increases in the valuations of our portfolio, and we expect to continue to purchase newly originated