Company: ADAMM
Filing Date: 2025-05-02
Form Type: 10-Q
Source: 0001273685-25-000047
Chunk: 93

Company: ADAMAS TRUST, INC.
Filing Date: 2025-05-02
Form: 10-Q
Item: Part I, Item 1
Chunk 93
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 Investment grade and high-yield credit spreads both widened over the course of the first quarter of 2025 with investment grade spreads finishing 15 basis points higher than the start of the first quarter of 2025 and high-yield spreads finishing 63 basis points higher than the start of the first quarter of 2025. 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. From June 2022 until the end of August 2024, the Treasury curve inverted with short term yields greater than long term yields, which was the longest inverted Treasury curve on record. 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. On March 31, 2025, the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield closed at 34 basis points, as compared to a 33 basis point spread on December 31, 2024. 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 asset purchase program aimed at providing liquidity to the U.S. Treasury and Agency RMBS markets. Under the Federal Reserve’s asset purchase program, the Federal Reserve’s balance sheet grew from about $4.2 trillion in assets at the start of March 2020 to about $8.9 trillion in assets at the end of the program in March 2022. On June 1, 2022, the Federal Reserve shifted course and began shrinking its balance sheet by reducing its holdings of U.S. Treasuries and Agency RMBS. As of the start of April 2025, the Federal Reserve continues to shrink its balance sheet by allowing $5 billion of U.S. Treasuries and $35 billion of Agency RMBS to roll off its balance sheet each month. As of April 16, 2025, the Federal Reserve held